A Critical Assumption When Using Target Profit Pricing Is That

question 26

Multiple Choice

A critical assumption when using target profit pricing is that

• A)a higher average price will not cause the demand for a product to fall.
• B)a higher average price will cause the demand for a product to rise.
• C)a higher average price will always cause the demand for a product to fall.
• D)this form of pricing is extremely risky because profit is tied to the current value of the dollar.
• E)being first is essential if you increase your average price since all of your competitors will do the same.

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Definitions:

Beginning Inventory

The valuation of inventory available for transaction at the start of an accounting timeframe.

Cost of Goods Sold

The financial outlays directly connected with creating the products a company sells, which entail materials and labor.

Purchases Returns and Allowances

Transactions involving the return of goods to suppliers or receiving discounts due to issues like damaged goods, leading to a reduction in purchase costs.

Merchandise Inventory

The goods a company holds in stock with the intention of selling them as part of its business operations.