Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
20 Cards in this Set
- Front
- Back
|
Target Cost formula
|
Market Price - Desired Profit = Target cost formula
|
|
|
Pricing
Pricing Objectives |
Gain market share, achieve a target rate of return
|
|
|
Pricing
Demand |
Price sensitivity, demographics
|
|
|
Pricing
Environment |
Political reaction to prices, patent or copyright protection
|
|
|
Pricing
Cost Considerations |
Fixed and variable costs, short-run or long-run
|
|
|
Why compute a target price?
|
For a desired profit!
|
|
|
target selling price formula
|
cost+(markup % * cost)= target selling price
|
|
|
Rate on investment formula (ROI)
|
net income / invested assets = ROI
|
|
|
Markup Percentage Formula
|
Desired ROI per unit/ Total unit cost = market percentage
|
|
|
Target Selling price per unit
|
Total unit cost + (total unit cost * markup percentage) = Target selling price per unit
|
|
|
minimum transfer price
|
variable cost + opportunity cost = minimum transfer price
|
|
|
absorption-cost pricing
|
An approach to pricing that defines the cost base as the manufacturing cost; it excludes both variable and fixed selling and administrative costs
|
|
|
Limitation of cost-plus pricing
|
Does not consider demand side, fixed cost per until changes with change in sale volume
|
|
|
Time and material pricing
|
An approach to cost-plus pricing in which the company uses two pricing rates, one for the labor used on a job and another for the material
|
|
|
Target cost related to price and profit means that
|
price and desired profit must be determined before cost
|
|
|
In a competitive, common-product environment, a seller would most likely use
|
target cost
|
|
|
Cost-Plus Pricing
|
A process whereby a product's selling price is determined by adding a markup to a cost base
|
|
|
Percentage Markup
|
Desired ROI/total unit cost
|
|
|
ROI per unit
|
(Desired ROI % * investment)/ units
|
|
|
Budgeted ROI percentage
|
Net Income / Invested assets
|
