A Skimming Pricing Policy Is Likely to Be Most Effective

question 219

Multiple Choice

A skimming pricing policy is likely to be most effective when

• A)consumers perceive your product to be similar to other products on the market.
• B)a lower price will have a major effect on reducing unit costs.
• C)competitors will be attracted to the market due to the potential for high sales revenues.
• D)consumers tend to be price sensitive.
• E)a high initial price will not attract competitors.

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Definitions:

FIFO Method

FIFO method, or First-In, First-Out, is an inventory costing method where the first items placed into inventory are the first ones sold, used for calculating cost of goods sold and ending inventory.

Cost of Goods Sold

Cost of goods sold is the direct costs attributable to the production of the goods sold by a company, including the cost of materials and labor.

Periodic System

An inventory system in which the inventory level is updated and cost of goods sold is calculated at the end of an accounting period.

Perpetual Inventory

An inventory management system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.