Case Study

Case Study - Case Study # 5 By using cost-plus pricing a...

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

View Full Document Right Arrow Icon
Case Study # 5 By using cost-plus pricing a for a supply contract a firm has the fore knowledge of their costs without having to determine if it is optimal to do a short run or long run of the products, thereby removing the concern that a company may be wasting money by doing a short run which at times may be more costly than doing a long run of a product. It is primarily used since it requires little information and is fairly easy to calculate. Though by using cost-plus pricing makes it easy to justify a rise in price due to an increase in cost, cost-plus pricing fails to realize the status of a competitor. It also bases the costs off of normal or standard output levels. Cost-plus pricing requires great accuracy when determining costs otherwise there could be a large discrepancy between the actual and estimated costs, thereby reducing the ability of the company to recover their costs leading to lower profitability. Gina does have the right to contest the pricing increase when the company has the
Background image of page 1

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

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

This note was uploaded on 11/01/2011 for the course MBA 575 taught by Professor Dr.tvorik during the Spring '11 term at St. Leo.

Page1 / 3

Case Study - Case Study # 5 By using cost-plus pricing a...

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