To use yield management strategies a business should have which combination of costs?
A) high variable and high fixed
B) low variable and high fixed
C) high variable and low fixed
D) low variable and low fixed
E) either A or B

Question

Quizplus · Accepted Answer

Yield management strategies are designed to optimize revenue by varying prices based on demand. For this reason, it is best for a business to have low variable costs and high fixed costs in order to maximize profit. This is because low variable costs mean that the cost of producing the additional unit of product or service is relatively low, which allows for more flexibility in pricing. High fixed costs mean that the bulk of the cost of producing the product or service is sunk and cannot be adjusted based on demand. Therefore, by varying prices based on demand with low variable costs, the business can maximize its revenue and profit.

To Use Yield Management Strategies a Business Should Have Which