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Price
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the amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service
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Customer value-based pricing
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setting price based on buyers' perceptions of value rather than on the seller's cost
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Considerations in Setting Price
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offering just the right combination of quality and good service at a fair price
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Value-based Pricing vs. Cost-based Pricing
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attaching value-added features and services to differentiate a company's offers and charging higher prices
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Good-value pricing
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setting prices based on the costs of producing, distributing, and selling the product plus a fair rate of return for effort and risk
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Value-added pricing
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costs that do no vary with production or sales level
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Cost-based pricing
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costs that vary directly with the level of production
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Fixed costs (overhead)
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the sum of the fixed and variable costs for any given level of production
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Variable costs
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the drop in the average per-unit production cost that comes with accumulated production experience
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Total costs
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adding a standard markup to the cost of the product
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Cost per Unit at Different Levels of Production per Period
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setting price to break even on the costs of making and marketing a product, or setting price to make a target return
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Cost per Unit as a Function of Accumulated Production: The Experience Curve
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setting prices based on competitors' strategies, prices, costs, and market offerings
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Experience curve (learning curve)
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pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met
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Cost-plus pricing (markup pricing)
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shows the number of units the market will buy in a given time period, at different prices that might be changed
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Break-even pricing (target return pricing)
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a measure of the sensitivity of demand to changes in price
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Break-Even Chart for Determining Target Return Price and Break-Even Volume
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Competition-based pricing
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Target costing
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Demand curve
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Price elasticity
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