Chapter 20 Tutorial Solutions

Chapter 20 Tutorial Solutions - AFC2131 Cost Information...

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AFC2131 Cost Information for Decision Making Week 10 (Chapter 20) Tutorial Solutions Semester 2, 2012 Note to students: Beware! These solutions are not necessarily model answers. In exams, you will not have demonstrated your understanding of the answers to these exercises if you seek only to memorise them. You are encouraged to use tutorial time to discuss issues that will test and clarify your understanding of these exercises, as well as expanding your analytical and critical-thinking skills. 20.1 In the long run, organisations need to price their products above the cost of producing and marketing of those products. While it is important for the price to be competitive with other available products, in the long run costs cannot be ignored. Understanding product costs helps companies to determine whether they can afford to be in that market or perhaps need to work at bringing costs down to enable them to be both competitive and profitable. 20.8 Three disadvantages of pricing based on absorption cost are as follows: 1 Absorption-cost data obscure the cost behaviour pattern by unitising fixed costs and making them appear variable.
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