ch06 - Cost Information for Pricing and Product Planning...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Cost Information for Pricing and Product Planning Chapter 6
Background image of page 1

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

View Full DocumentRight Arrow Icon
Role Of Product Costs In Pricing And Product Mix Decisions Understanding how to analyze product costs is important for making pricing decisions: Managers make decisions about establishing or accepting a price for their products Even when prices are set by the market and the firm has little or no influence on product prices, management still has to decide the best mix of products to manufacture and sell
Background image of page 2
Role of Product Costs Product cost analysis is also significant when a firm is deciding how best to deploy marketing and promotion resources How much commission (or how many other incentives) to provide the sales force for different products How large a discount to offer off list prices
Background image of page 3

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

View Full DocumentRight Arrow Icon
Short-term and Long-term Pricing Considerations The costs of many resources are likely to be committed costs in the short-term because firms cannot easily alter the capacities made available for many production and support activities For short-term decisions, it is important to note whether surplus capacity is available for additional production, or whether shortages of available capacity limit additional production alternatives
Background image of page 4
Short-term and Long-term Pricing Considerations The length of time a firm must commit its production capacity to fill that order is important because a long-term capacity commitment to a marginally profitable order may: Prevent the firm from deploying its capacity for more profitable products or orders, should demand for them arise in the future Force the firm to add expensive new capacity to handle future sales increases
Background image of page 5

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

View Full DocumentRight Arrow Icon
Short-term and Long-term Pricing Considerations If production is constrained by inadequate capacity, managers need to consider whether overtime production or the use of subcontractors can help augment capacity in the short term In the long term, managers have considerably more flexibility to adjust the capacities of activity resources to match the demand for them in producing various products Decisions about whether to introduce new products or eliminate existing products have long-term consequences
Background image of page 6
Ability To Influence Prices If the firm is one of a large number of firms in an industry, and if there is little to distinguish the products of different firms from each other: Such a firm is a price taker , and it chooses its product mix given the prices set in the marketplace for its products
Background image of page 7

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

View Full DocumentRight Arrow Icon
Ability To Influence Prices Firms in an industry with relatively little competition, who enjoy large market shares and exercise industry leadership, must decide what prices to set for their products Firms in industries in which products are highly customized or otherwise differentiated from each other also need to set the prices for their differentiated products Such firms are price setters
Background image of page 8
A small firm, or a firm with a negligible market share in this industry, behaves as a price taker
Background image of page 9

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

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/16/2010 for the course ECN 5050 taught by Professor Yamashita during the Spring '10 term at Nova Southeastern University.

Page1 / 44

ch06 - Cost Information for Pricing and Product Planning...

This preview shows document pages 1 - 10. Sign up to view the full document.

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