Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Which of the following is a cost-based pricing approach?

Penetration pricing

Market-based pricing

Value-based pricing

Absorption costing

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Verified step by step guidance

Understand the concept of cost-based pricing: Cost-based pricing involves setting the price of a product based on the costs incurred to produce it, including direct costs (materials and labor) and indirect costs (overheads). Absorption costing is a method that allocates all production costs, both fixed and variable, to the product.

Review the options provided: Penetration pricing, market-based pricing, and value-based pricing are not cost-based approaches. Penetration pricing focuses on setting a low price to gain market share, market-based pricing relies on competitive market conditions, and value-based pricing is determined by the perceived value to the customer.

Identify the correct approach: Absorption costing is a cost-based pricing method because it uses the total cost of production (including fixed and variable costs) as the basis for setting the price.

Clarify why absorption costing fits: Absorption costing ensures that all costs associated with production are accounted for in the pricing strategy, making it a cost-based approach. This contrasts with other methods that rely on external factors like market conditions or customer value.

Conclude the reasoning: Absorption costing is the correct answer because it aligns with the principles of cost-based pricing, where the price is derived from the total production costs.