A Skimming Pricing Policy Is Likely to Be Most Effective

question 262

Multiple Choice

A skimming pricing policy is likely to be most effective when

• A) consumers perceive the company's product to be similar to other products on the market.
• B) a lower price will significantly lower fixed costs.
• C) the company's product is easily and quickly duplicated.
• D) consumers tend to be price-sensitive.
• E) the high initial price will not attract competitors.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs, both variable and fixed, in the cost of a product, and is used for external reporting purposes.

Unit Product Cost

The total cost associated with manufacturing one unit of a product, including labor, materials, and overhead expenses.

Year 1

A term typically used to refer to the first year of operation, accounting period, or investment.

Fixed Manufacturing Overhead

Costs associated with production that do not vary with the level of output, including rent, salaries, and equipment depreciation.