chap12 - David Franz, 2012 Chapter 12: Pricing Decisions,...

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© David Franz, 2012 Chapter 12: Pricing Decisions, and Cost Management I. Major influences on pricing decisions A. Customers: consider customers reaction to a price. They could choose a competitor or substitute product. Demand side of supply and demand. B. Competitors: activities of competitors and prices set by competitors may drive your pricing decisions. Supply side of supply and demand. C. Costs: Firms want to price products above their costs to make a profit. In some less-competitive industries firms can set price at cost plus a profit margin. II. Product prices and the time horizon A. Costing and pricing for the short run. 1. One-time orders consider all costs that will change because of the order, typically variable manufacturing, marketing, distribution, and customer service costs. Fixed costs are usually not effected. Should also consider competitors’ prices and impact on existing customers. B. Costing and pricing for the long run. 1. For long-run prices accurate product cost data is critical, i.e. chapters 4,5,17,18. 2. When prices are set by market forces, costs are a basis for the decision to enter or exit a market. 1
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3. When a firm has some control over prices, long-run costs are a basis for setting price. 4.
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This note was uploaded on 09/29/2011 for the course ACCT 305 taught by Professor Franz during the Spring '07 term at S.F. State.

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chap12 - David Franz, 2012 Chapter 12: Pricing Decisions,...

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