Beruflich Dokumente
Kultur Dokumente
Learning Objectives
Short-run and long-run pricing decisions
Target costing
Cost incurrence and locked-in costs Cost-plus costing Life-cycle budgeting and costing Non-costs factors in setting price
Anti-trust laws
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establishing alternatives
Through pricing schemes, product features, and
production volume
3. Suppliers by affecting costs and supply The lower the cost, the greater the supply
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Differentiation:
Create value for the customer through product innovation, product features, customer service, etc. for which the customer is willing to pay
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Short-Term Pricing
Less than one year:
One time special order with no long-run implications Adjusting product mix and output volume in a competitive
market
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Total
$165,000 150,000 = $1.10
$39.10
Any bid above $39.10 will improve Lomass profitability in the short run.
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Long-Term Pricing
One year or longer Pricing a product in a major market where there is some
long run
Set Profit margins to earn a reasonable return on
investment
Lower prices when demand is weak and increase them
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Market-based
Base price on customers demand and competitor reaction
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66.50
$516.50
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The direct fixed costs of machines used exclusively for the manufacture of Complex Computer total $7,000,000. What is the cost of producing 100,000 units of Complex Computer?
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Market-Based Pricing
Must understanding customers and competitors:
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Market-Based Pricing
Start with a target price
Estimated price that potential customers will pay Based on customers perceived value Or how competitors will price competing products or
services
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needs
2. 3.
Choose a target price Derive a target cost per unit: Target price per unit minus target operating income per unit Perform cost analysis Perform value engineering to achieve target cost
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4. 5.
Value Engineering
Product Design Production Research and Development Securing raw materials and other resources
Marketing
Value Engineering
A systematic evaluation of the value chain
Reduce costs while improving quality and satisfying
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Non-value-added costs
If eliminated, would
Gray area
Many costs fit between the two extremes
e.g., preventative maintenance
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Employee frustration with failed targets A cross-functional team may over-engineer, to accommodate the wishes of team members A product development may require a long time as alternative designs are repeatedly evaluated Risk of organizational conflict
http://www.forbes.com/sites/joannmuller/2013/01/13/ new-corvette-is-a-sign-of-the-times-at-gm/
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process
The markup is somewhat flexible, based partially on
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aims to achieve, divided by invested capital Selecting the cost bases for the cost-plus calculation:
Variable manufacturing cost
Variable cost Manufacturing cost Full cost
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Cost-Plus Pricing
Assume that Latishas engineers have redesigned CC into CCI at a new cost of $637.50. The company desires a 20% markup on the full unit cost.
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Cost-Plus Pricing
$637.50 127.50
$765.00
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support
Until services are no long offered on that product
(orphaned)
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costly
Many costs are locked in at the R&D and design stages,
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Peak-load pricing
Charging a higher price for the same product or service
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below costs in an effort to drive competitors out of the market and restrict supply, and then raising prices
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produced
This lower price materially injures or threatens to
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