6. A business has decided to develop and market a new laptop. Management has calculated the average cost for each laptop would be $1000 and has added a 70% margin to set the final price. Which type of pricing method is this business using? (a) Cost pricing (b) Market pricing (c) Penetration pricing (d) Competition pricing 7. Which of the following strategies uses a sales approach to marketing? (a) A business that focuses on producing products (b) A business that decides to increase its advertising budget (c) A business that decides to implement loyalty cards for their customers (d) A business that focuses on customer satisfaction in order to increase their sales
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
6. A business has decided to develop and market a new laptop. Management has calculated the average cost for each laptop would be $1000 and has added a 70% margin to set the final price. Which type of pricing method is this business using?
(a) Cost pricing
(b) Market pricing
(c) Penetration pricing
(d) Competition pricing
7. Which of the following strategies uses a sales approach to marketing?
(a) A business that focuses on producing products
(b) A business that decides to increase its advertising budget
(c) A business that decides to implement loyalty cards for their customers
(d) A business that focuses on customer satisfaction in order to increase their sales
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