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Managers base prices on product costs due to many reasons. Which of the following is not one of the reasons?
A) Most companies sell many products and services and cost-based pricing provides a simple and direct approach.
B) Cost-based pricing provides a good starting point for managers.
C) The cost of a product or service provides a lower limit or floor, below which the price cannot be set in the long run.
D) Cost-based pricing is useful for standard cost analysis.
Cost-Based Pricing
A pricing method used by companies to determine the selling price of a product by adding a profit margin to the total cost of producing or purchasing the product.
Standard Cost Analysis
The practice of comparing standard costs to actual costs to identify variances, understand causes, and take corrective actions.
Lower Limit
The minimum threshold or boundary for a variable or parameter within a given context, such as statistical control limits.
- Gain insight into the elementary theories of pricing models and strategies.
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Learning Objectives
- Gain insight into the elementary theories of pricing models and strategies.
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