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Hello Tutor, I have a query about the pricing decision question,as below :
“which of the following strategies could be used to price a new product?
i. Absorption Costing
ii. Price skimming
iii. Price penetration
iv. Cost plus pricingA. i and ii
B. ii and iii
C. ii, iii and iv
D iii and ivMy answer is C but is wrong and i wonder why the cost plus pricing cannot used to price a new product? I hope Tutor will help me to clarify this issue, thank you so much 🙂
All of the strategies could be used – it is up to the company what strategy they use – but cost plus pricing is not sensible because it ignores any competition and ignores the affect of the selling price on the demand.
Do watch my free lectures on pricing. The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
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