Week 3 Discussion Variable Costing 1

Week 3 Discussion Variable Costing 1 - That would defeat...

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Since all products and services must be accounted for when setting prices, it is difficult to make a large profit on your product if there is a competitive market that is offering the same product at a low price. As stated, customers will not pay more for the same product, so what are the other options. The equation to finding the breakeven point and how many units is required to make a certain target profit does not change, one clear solution is to change your fixed and variable costs. This leads to two options: cut costs, or change the product in somehow. I think the important thing for a company to remember is if they choose to cut costs, they should not jeopardize the quality of the product.
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Unformatted text preview: That would defeat the purpose of trying to obtain maximum profits. This may make differentiating your product a better choice. If you can pull your company out of the low priced competitive market, you have a little more leeway to set the price at a higher level to obtain more profits and still not lose your customer. The article below agrees with my opinion stated above that changing a product or product innovation may be the answer to helping with pricing in this very competitive economy. The example given is for polystyrene. Source: http://www.articlesbase.com/strategic-planning-articles/cost-cutting-versus-product-innovation-with-polymer-coating-854489.html...
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