​John Learned in Business School That Full-Cost Pricing Is a Very

question 85

Multiple Choice

​John learned in business school that full-cost pricing is a very common cost-oriented pricing procedure,and he planned to use it in setting price for his firm's new software product.However,his boss is not convinced that full-cost pricing is best,and wants John to list both its pluses and minuses in a memo.Which of the following should be included in John's list?

• A)​Full-cost pricing will enable the firm to recover all the costs it incurred while developing the software, including the overhead of running its research and development lab.
• B)​Full-cost pricing will take into account the likely competitive moves of other software developers.
• C)​Full-cost pricing is based on a reliable projection of customer demand in the software market.
• D)​Full-cost pricing does not ensure that overhead costs will be allocated appropriately.
• E)​Full-cost pricing can use only those costs that are directly attributable to a specific output, like production of 1000 units of the software.

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Definitions:

Water Meter

A device used to measure the volume of water usage in residential, commercial, or any other building for the purpose of billing and monitoring.

CCF

Stands for hundred cubic feet and is a unit of measurement often used for billing natural gas or water usage.

Piecewise Function

A mathematical function defined by multiple sub-functions, each applying to a certain interval of the main function's domain.

Internet Service

A service that provides access to the Internet, including broadband, DSL, fiber-optic, and satellite connections.