Pricing Objectives and Strategies Quiz

Questions and Answers

$\frac{Fixed ext{ }cost}{(Variable ext{ }price ext{ }per ext{ }unit - Variable ext{ }cost ext{ }per ext{ }unit)}$

Maximize total revenue relative to total costs

A reasonable level of profits consistent with the level of risk

Management’s effectiveness in generating profits with available assets Signup and view all the answers

Maintain existing prices or meet the competition’s prices Signup and view all the answers

The cost of something they want Signup and view all the answers

The value of existing products Signup and view all the answers

Establishing Pricing Objectives Signup and view all the answers

How much does it cost to bring the product to market Signup and view all the answers

The life cycle of the product Signup and view all the answers

$ ext{Fixed cost} / ( ext{Variable price per unit} - ext{Variable cost per unit})$ Signup and view all the answers

Company's product sales as a percentage of total industry sales Signup and view all the answers

Maximizing sales regardless of profits, competition, and environment Signup and view all the answers

Maintain existing prices or meet the competition’s prices Signup and view all the answers

Management’s effectiveness in generating profits with available assets Signup and view all the answers

Study Notes

Pricing Objectives and Strategies

BEP formula: Fixed cost divided by (Variable price per unit – Variable cost per unit)
The market determines the price in practice
Three basic pricing approaches: price skimming, penetration pricing, and status quo pricing
Price tactic involves setting a base price and fine-tuning it with various pricing tactics
Pricing objectives consider product demand, costs, profits, and trade-offs
Profit maximization seeks to maximize total revenue relative to total costs
Satisfactory profits aim for a reasonable level of profits consistent with the level of risk
Target return on investment (ROI) measures management’s effectiveness in generating profits with available assets
Market share is a company’s product sales as a percentage of total industry sales
Sales maximization focuses on maximizing sales regardless of profits, competition, and environment
Status quo pricing seeks to maintain existing prices or meet the competition’s prices
Status quo pricing can lead to suboptimal pricing by ignoring customer value, demand, and costs

Pricing Objectives and Strategies

BEP formula: Fixed cost divided by (Variable price per unit – Variable cost per unit)
The market determines the price in practice
Three basic pricing approaches: price skimming, penetration pricing, and status quo pricing
Price tactic involves setting a base price and fine-tuning it with various pricing tactics
Pricing objectives consider product demand, costs, profits, and trade-offs
Profit maximization seeks to maximize total revenue relative to total costs
Satisfactory profits aim for a reasonable level of profits consistent with the level of risk
Target return on investment (ROI) measures management’s effectiveness in generating profits with available assets
Market share is a company’s product sales as a percentage of total industry sales
Sales maximization focuses on maximizing sales regardless of profits, competition, and environment
Status quo pricing seeks to maintain existing prices or meet the competition’s prices
Status quo pricing can lead to suboptimal pricing by ignoring customer value, demand, and costs