‘Golden Ice Cream Limited’ is a manufacturer and supplier of ice creams. They set the price of their various ice cream varieties based on…

‘Golden Ice Cream Limited’ is a manufacturer and supplier of ice creams. They set the price of their various ice cream varieties based on manufacturing estimates. The company had been earning good profits over the last many years as there were no competitors in the market for their ice creams. However, during the last year, the company incurred heavy losses. On investigation they noticed that while setting the prices, they did not take into account the actions of competitors, which may have led to these losses. Additionally, the pricing method used by the company includes sunk cost and ignores opportunity costs.

Identify the pricing method used by the company.

Explain any two advantages of the pricing method identified in (a) above.