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A relevant cost (also called avoidable cost or differential cost) [1] is a cost that differs between alternatives being considered. [2] In order for a cost to be a relevant cost it must be: Future
An example is a high-speed internet connection shared by two consumers in a single building; if one is willing to pay less than half the cost of connecting the building, and the other willing to make up the rest but not to pay the entire cost, then price discrimination can allow the purchase to take place.
Differential costs: This cost is the difference in total cost resulting from selecting one alternative over another. Opportunity costs: The value of a benefit sacrificed in favour of an alternative course of action. Relevant cost: The relevant cost is a cost which is relevant in various decisions of management.
Schools that use a differential tuition model base tuition costs on factors such as your field of study and the market value of your degree, student demand for the major and the cost of instruction.
A restaurant may price all of its desserts at the same price and lets the consumer freely choose its preferences since all the alternatives cost the same. [10] A clear example of Horizontal Product Differentiation can be seen when comparing Coca Cola and Pepsi: if priced the same then individuals will differentiate between the two based purely ...
A common example of a sunk cost for a business is the promotion of a brand name. This type of marketing incurs costs that cannot normally be recovered [citation needed]. It is not typically possible to later "demote" one's brand names in exchange for cash [citation needed]. A second example is research and development (R&D) costs.
Pricing is the process whereby a business sets and displays the price at which it will sell its products and services and may be part of the business's marketing plan.In setting prices, the business will take into account the price at which it could acquire the goods, the manufacturing cost, the marketplace, competition, market condition, brand, and quality of the product.
If, for example, an item has a marginal cost of $1.00 and a normal selling price is $2.00, the firm selling the item might wish to lower the price to $1.10 if demand has waned. The business would choose this approach because the incremental profit of 10 cents from the transaction is better than no sale at all.