contribution per unit of output no longer

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Unformatted text preview: onstraints” Finding ways to process more units through a resource bottleneck Managerial Accounting At the bottleneck itself: • Improve the process • Add overtime or another shift • Hire new workers or acquire more machines • Subcontract production • Reduce amount of defective units produced • Add workers transferred from non-bottleneck departments 12-45 Pricing Products and Services Appendix 12A Managerial Accounting 12-46 Pricing Decisions Cost + mark-up approach if you are a price setter (i.e., not a price taker) How to determine mark-up? Problems with ROI approach? ROI approach Rule of thumb Industry norms (if you can determine them) assumes that customers need forecasted unit sales and will pay whatever price the company decides to charge however, customers have a choice; if the price is too high they can buy from a competitor or choose not to buy at all Target costing approach. How does it differ from the cost plus approach to pricing? cost plus approach: start with a cost base and apply a predetermined markup to arrive at target selling price selling price = cost + (markup percentage × co...
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This test prep was uploaded on 04/09/2014 for the course AFM 102 at Waterloo.

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