Answered: Lowering price does not always increase…

Lowering price does not always increase revenue with increased demand. Besides reducing price, what else can a firm do to stimulate demand for its product?

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter13: Capital Structure And Leverage

Section: Chapter Questions

Problem 2Q: Would each of the following increase, decrease, or have an indeterminant effect on a firms...

See similar textbooks

Related questions

Q: The margin of safety is the excess of: O Break-even sales over expected sales. O Expected sales over…

A: Introduction:- Break-even point point means, where no profit or loss At Break-even point point,…

Q: Why would a company want to know their operating leverage when they can already calculate the number…

A: Degree of operating leverage means the division of contribution with operating income. Number of…

Q: Break-even analysis is concerned with determining a point at which the company can minimize total…

A: Breakeven analysis is very important done by management and cost accountants of the business. With…

Q: A company that desires to lower its break-even point should strive to: reduce variable costs.…

A: Breakeven point in cost accounting is that point of revenue at which business is only recovering…

Q: 6. What will be the impact on a company's profit if sales mix shifts between low margin and high…

A: Sales mix represents the proportion of sales of each product in relation with the total sales of the…

Q: Would an increase in variable costs per unit cause a company’s break-even point to increase or…

A: Variable cost is an amount that changes in total in proportion to the volume produced and sold…

Q: If fixed costs related to a product increase, while variable costs and sales ?price remain constant,…

A: Breakeven point is that point of sales revenue at which business is covering its fixed costs and…

Q: In a multi-product company, as the mix of the products being sold changes, the overall contribution…

A: Overall contribution margin is the mix of individual contribution margin with the weights of their…

Q: Is my explanation correct? When the shit in sales toward the lower contribution margin. In the…

A: Dear student your explanation is correct. In the sales mix, if the shift in sales to a product that…

Q: Which of the following statements regarding price elasticity is incorrect? a. A product with a…

A: a) In a perfectly inelastic demand the consumers are willing to pay any price for the product and so…

Q: Break-even analysis is concerned with determining a point at which the company can minimize total…

A: Break-even point is the point reached by the company where the revenues and costs of the firm are in…

Q: Michael Porter argues a firm cannot be at the same time a cost leader and a differentiator. Do…

Q: How would an increase in sales volume affect the break-even point and the margin of safety

A: Break-Even point :- The break-even point is that the point wherever a company’s revenues equals its…

Q: Which of the following statements is true? A In linear break-even analysis, the contribution margin…

A: As per the linear break-even model, the contribution margin per unit is the difference between the…

Q: Given the weaknesses of cost-based pricing, why wouldany company use this method?

A: Cost-based pricing means setting prices based on the cost of goods and services. The major…

Q: - A seller in a perfectly competitive market can increase his profit in the short run by: (a)…

A: A perfectly competitive market is the theoretical market structure where all firms sell similar…

Q: When constrained by a limiting resource, managers often seek to produce those products which have:…

A: if a manager constrained by limiting resource, he can be to produce those products which have the…

Q: Which of the following statements regarding price elasticity is incorrect? A product with a…

A: Price Elasticity:Price elasticity refers to the calculation of changes in demand and price of a…

Q: A firm with a high degree of operating leverage: " will have a more significant shift in income as…

A: Degree of Operating Leverage is a relation of contribution margin to the net income. Contribution…

Q: The profit maximizing condition for a purely competitive firm is when. Price elasticity of demand is…

A: The correct answer for the above mentioned question is given in the following steps for your…

Q: Explain how a shift in the sales mix could result in both a higher break-even point and a lower net…

A: Sales mix involves the composition of different products and some products have a higher margin of…

Q: When constrained by a limiting resource, managers often seek to produce those products which have:…

A: When constrained by some budget or limited sources managers often try to make products which lie in…

Q: Why do product-costing systems based on a single, volume-based cost driver tend to over-cost…

A: Single volume-based cost driver means the basis of allocation of costs to particular products using…

Q: Compared to companies that have a cost structure that is mainly comprised of fixed costs, companies…

A: Operating income shows that how revenue leads to growth in operating income. It is a tool to measure…

Q: Firms with a high degree of operating leverage:

A: Degree of operating leverage is a measure that determines the quantum of change in a company's…

Q: Companies should always make and sell all products whose selling prices exceed variable costs.”…

A: Contribution margin: Contribution margin is computed by deducting variable expense from revenues. It…

Q: Would an increase in per-unit selling price cause a company’s break-even point to increase or…

A: The breakeven point (break-even price) for a trade or investment is determined by comparing an…

Q: ot lower a company's break-even poin O increase selling prices O reduce variable costs O decrease…

A: The correct answer is Sell More units.

Q: The break-even point in a given situation would be decreased by an increase in a. the CM ratio. b.…

A: CVP analysis is considered a decision-making tool that helps management to make strategies and take…

Q: Which of the following statements about operating leverage is false? O a. If the degree of operating…

A: Operating Leverage = %change in EBIT / % change in sales

Q: How can poor quality be expensive to the firm, especially if low-cost raw materials are used to…

A: The final objective of Cost Accounting is to reduce cost. Every firm wants to reduce cost thereby…

Q: Corning’s market value was below its book value because it was facing pricing pressure in the…

A: The price pressure hypothesis (PPH) predicts that shocks will have a temporary effect on prices…

Q: Which of the followings is NOT an advantage of financial institutions in consumption smoothing? A.…

A: Financial Institutions Institutions involved in financial transactions such as lending and borrowing…

Q: Which of the following statements about operating leverage is false? O a. Keeping all factors…

A: Operating leverage: It is a cost account accounting method or technique used by the firm to measure…

Q: Why do product-costing systems based on a single, volume-based cost driver tend to overcost…

Q: A seller in a perfectly competitive market can increase his profit in the short run by: (a)…

A: While considering perfectly competitive market, all the companies vend same kinds of products and…

Q: In competitive markets economic profit becomes zero in the long-run. However, it is also possible…

A: Economic profits and losses play a crucial role in the model of perfect competition. The existence…

Q: Do you agree or disagree with this statement? why?

A: Given statement is: Since break-even analysis focuses on making zero profit, it is of no value in…

Q: Compared to companies that have a cost structure that is mainly comprised of variable costs,…

A: Ans. Mostly companies incur two types of cost - Variable cost or fixed cost. Variable cost changes…

Q: Explain how a shift in the sales mix could result in both a higher break-even point and a lower…

A: Sales mix involves the composition of different products and some products have a higher margin of…

Q: Which of the following is not an assumption of break-even analysis? a. A company is operating within…

A: Break-Even Point: It is the point of sales at which entity neither earns a profit nor suffers a…

Question

Lowering price does not always increase revenue with increased demand. Besides reducing price, what else can a firm do to stimulate demand for its product?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

Why would a firm ever offer a price on a product that is below its full cost?
Would each of the following increase, decrease, or have an indeterminant effect on a firms break-even point (unit sales)? a. The sales price increases with no change in unit costs. b. An increase in fixed costs is accompanied by a decrease in variable costs. c. Variable labor costs decline; other things are held constant.
When a Dupont analysis reveals that a company has much higher than average asset turnover and much lower than average profit margin, what can be concluded about the companys strategy? a. It is a product differentiator. c. It has no strategy. b. It needs to concentrate on improve- d. It is a low-cost provider ing its profit margins.
A company accepts incremental business at a special price that exceeds the variable cost. What other issues must the company consider in deciding whether to accept the business?
If a firm's marginal revenue is smaller than its marginal cost, then the firm should collect additional information before taking any action. increase output to increase profit. keep output the same decrease output to increase profit.
A company that desires to lower its break-even point should strive to: reduce variable costs. pursue more than one of the above actions. sell more units. decrease selling prices. increase fixed costs.
Did TTW increase unit sales by cutting prices or by using some other strategy?
Question-. If a pure monopolist can price discriminate by separating buyers into two or more groups: A. the marginal revenue curve will now shift to a position above the demand curve. B.marginal revenue will become less at each level of output than it would be without price discrimination. C. the firm will face multiple marginal revenue curves. E. the marginal revenue curve and the total revenue curve will now coincide I think the answer is C?
Which of the following statements regarding price elasticity is incorrect? A product with a perfectly inelastic demand would have the same demand even as prices change. A product with a perfectly inelastic demand would see demand change as prices change. When demand is price elastic, lower prices stimulate demand. When demand is price elastic, higher prices reduce demand.
When deciding whether to sell as is or process a product further, managers should ignore which of the following? a. The costs of processing the product thus far b. The cost of processing further c. The revenue if the product is sold as is d. The revenue if the product is processed further
the link between short-run average costs and long-run average costs? Explain the association between return to scale and economies of scale and suggest the potential sources of internal and external economies of scale. Why might firms face diseconomies of scale and shutdown/break-even situations in the long run?
Which of the following statements regarding price elasticity is incorrect? a. A product with a perfectly inelastic demand would have the same demand even as prices change. b. A product with a perfectly inelastic demand would see demand change as prices change. c. When demand is price elastic, lower prices stimulate demand. d. When demand is price elastic, higher prices reduce demand.