List the three basic pricing methods. Name one advantage and one disadvantage associated with using each method.
What will be an ideal response?
PRICE-SKIMMING advantages include (1) quick recovery of product development or educational costs, (2) pricing flexibility that allows subsequent lowering of price, and (3) the ability to market prestige products successfully. Disadvantages include encouragement of competitive entry into the market.
PENETRATION PRICING advantages include (1) a tendency to discourage competitive entry, (2) large market share due to high volume sold, and (3) lower production costs resulting from economies of scale. Disadvantages include (1) lower profits per unit, (2) higher volume required to reach the break-even point, (3) slow recovery of development costs, and (4) inability to later raise prices.
STATUS QUO POLICIES have the advantage of simplicity. Disadvantages include ignoring demand and cost.
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A. cluster structure. B. ad hoc committee. C. informal group. D. task force. E. standing committee.
O'Hare Company is a manufacturing firm that uses a job-order costing system to determine the costs of its products. During the current accounting period, O'Hare recognized cost of goods sold of $4,850 for Job #132. The recognition of this event will include a decrease to which of the following accounts?
A. Production Supplies. B. Cost of Goods Sold. C. Work in Process Inventory. D. Finished Goods Inventory.
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