All of the Following Are True About a Skimming Pricing

question 175

Multiple Choice

All of the following are true about a skimming pricing strategy when used during the introduction stage of the product life cycle except which?

• A) It capitalizes on the price insensitivity of early buyers.
• B) It typically results in profit margins that are high.
• C) It encourages competitive entrants into the market.
• D) It recovers the R&D costs of the new offering.
• E) It helps build unit volume.

Determine the effect of accounting choices on the comparability of financial statements.

Understand how leverage ratios reflect a firm's financial structure and risk.

Evaluate a firm's liquidity using current and quick ratios.

Interpret the implications of financial ratios on investment decision-making using fundamental analysis.

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Definitions:

Ending Finished Goods

Ending Finished Goods are the inventory of completed products that are available for sale at the end of an accounting period.

Net Operating Income

This is the profit a company makes from its operations, after all operating expenses have been subtracted from revenues but before taxes and interest are deducted.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much revenue is contributing to fixed expenses and net income.

Variable Costing

An accounting method that only considers variable costs (costs that vary with the level of output) when calculating the cost of goods sold and production.