Ch 15

Managerial Accounting: Creating Value in a Dynamic Business Environment

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Ch 15 Chapter Overview I. Major Influences on Pricing Decisions  A. Customer demand B. Actions of competitors C. Costs D. Political, legal, and image-related issues II. Economic Profit-Maximization Pricing (a)   Total revenue: Price multiplied by quantity sold. (b) Marginal revenue: The amount by which total revenue increases  when one additional unit is sold. (c) Demand curve: A graphical or mathematical expression of the  relationship between the price and the quantity sold. (d) Price elasticity: The impact of price changes on sales volume. (e) Cross-elasticity: The extent to which a change in a product’s price  affects the demand for substitute products. E. Limitations of the profit-maximizing model  1.   The   firm’s   demand   and   marginal   revenue   curves   are   difficult   to  determine with precision. 2. The marginal-cost, marginal-revenue paradigm, as described in the text, 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: is not valid for all forms of market organization. 3. Cost-accounting systems are not designed to measure the marginal changes in cost incurred as production and sales increase unit by unit. To measure marginal cost would entail a very costly information system. III. Role of Accounting Product Costs in Pricing General formula Price = Cost + (markup % *cost) Depending on how cost is defined, markup % may differ. 1 A. Cost-plus pricing B. Absorption-cost pricing formulas C. Variable-cost pricing formulas D. Determining the markup IV. Strategic Pricing of New Products A. Price skimming: Initial high price B. Penetration pricing: Initial low price V. Target Costing A. Key principles B. Activity-based costing and target costing C. Value engineering VI. Other Issues A. Time and material pricing B. Competitive bidding C. Antitrust laws 2...
View Full Document

This document was uploaded on 06/22/2010.

Page1 / 2

Ch 15 - is not valid for all forms of market organization....

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online