ACCA Performance Management (F5) Certification Practice Exam

What does volume-discounting pricing strategy entail?

1. Offering higher prices for larger purchases

2. Providing lower prices per unit with high quantity purchases

3. Setting a fixed price for bulk items regardless of quantity

4. Standard pricing regardless of purchase volume

The correct answer is: Providing lower prices per unit with high quantity purchases

Volume-discounting pricing strategy is based on the principle of incentivizing customers to purchase larger quantities by offering lower prices per unit for those larger purchases. This approach benefits both the seller, who may increase sales volume and improve inventory turnover, and the buyer, who saves money by acquiring goods at a reduced rate. The rationale behind this strategy is that as the quantity purchased increases, the cost of handling, shipping, and storage per unit typically declines, allowing businesses to pass some of those savings onto customers. This encourages bulk purchasing behavior, which can lead to customer loyalty and repeated sales. In contrast, the other options do not align with this strategy. For instance, offering higher prices for larger purchases contradicts the essence of volume discounting, which is to lower prices as quantities increase. Similarly, setting a fixed price for bulk items or maintaining standard pricing regardless of volume misses the core idea of adjusting prices based on purchase quantities, which is central to volume-discounting pricing.