Question

Jian has entered into a contract with the federal government to design a computer simulation model for training helicopter pilots. The contract calls for the final price to be set at a fixed percentage profit over and above her cost of production. This seems to represent a:
A. cost-based pricing strategy.
B. supply and demand formula.
C. demand-based pricing strategy.
D. price leadership pricing strategy.

Answer 1

Answer:

The answer is: A. cost-based pricing strategy

Explanation:

Cost-based pricing strategy is the strategy where pricing of product is determined by adding the desired profit to the cost of product sold to come up with the selling price.

As described in the questions, Jian will set selling price by adding fixed percentage of profit into her production cost. Thus, A. is the correct answer.

B and C is not correct because her pricing strategy is not dependent to how much version of the simulation model the government requires.

D. is not correct because price leadership strategy describes the situation where a seller set pricing at or even below their competitors to gain market share. Jian's pricing strategy is not dependent on how much other competitors ( if any) set their product's price.