What is cost-plus pricing

Reference no: EM13320411

Consider the following information, prepared based on a capacity of 40,000 units:

Category	Cost per Unit
Variable manufacturing costs	$5.00
Fixed manufacturing costs	$1.50
Variable marketing costs	$1.00
Fixed marketing costs	$0.50

Capacity cannot be added in the short run and the firm currently sells the product for $10 per unit.

Consider each of these scenarios independent of each other.

a) The company is currently producing 30,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. The customer is willing to pay $5.50 per unit. Since the potential customer approached the firm, there will be no variable marketing costs incurred. Should the company accept the special order? Why or why not? Be specific.

b) Assume the same facts as in part a, except that the company is producing 40,000 units per month. Should the company accept the special order? Why or why not? Be specific.

c) List and describe other factors (not those addressed in parts a and b) that should be taken into consideration when deciding whether to accept a special order? Be specific in your responses.

Question 3

a) What is life-cycle costing? Under what circumstances can it be most useful? What are some potential problems with this approach? Be specific in your responses.

b) What is target pricing? Under what circumstances can it be most useful? What are some potential problems with this approach? Be specific in your responses.

c) What is cost-plus pricing? Under what circumstances can it be most useful? What are some potential problems with this approach? Be specific in your responses.

Reference no: EM13320411

Questions Cloud

Determine the new q through the system at c : Parallel pipes, fixed overall H, ?EGL or hl = 75'. Elevated Tank A water surface is at El 625, 3000' away is Tank B with free surface El 550 They are connected by a 12" dia cast iron pipe.

Span of the children for the various commercials : The commercials were for clothes, food, and toys. At the .05 significance level is there a difference in the mean attention span of the children for the various commercials? Are there significant differences between pairs of means?

Petty fears and petty pleasures : In observing this reality, "we perceive that only great and worthy things have any permanent and absolute existence that petty fears and petty pleasures are but the shadow of the reality." In a culture dominated by social networking and high t..

Convergence of united states accounting standards : Within today's international business environment, there has been a great deal of discussion about the convergence of United States accounting standards

What is cost-plus pricing : What is cost-plus pricing? Under what circumstances can it be most useful? What are some potential problems with this approach? Be specific in your responses.

What is a rhetorical question : What is a rhetorical question?

Determine the total amount of product cost : Determine the total amount of product cost (cost of goods manufactured) and period cost incurred during August 2013.Total amount of product cost $

Calculate the rise in temperature : A person undergoing radiation treatment for a cancerous growth receives an absorbed dose of 1.8 Gy. All the radiation is absorbed by the gowth. Determine the rise in temperature

A final payment of interest : The loan will allow you to paid $300 in interest for three months and a final payment of interest and principal at the end of the four month.

User Account

All Pages