Reference no: EM132536578
Case Study: Strategic pricing of new product
ABC Limited is developing a new clothes dryer, Dry Master, that it plans to sell to coin operated laundries. Currently, the market leader is a product called Dry Well, which is sold by a competitor. The management accountant of the company is doing a market research to determine appropriate selling price for the new clothes dryer.
The management accountant gathered the following information regarding the cost of developing 400 new cloth dryer.
Variable Costs:
Manufacturing $194,000
Sales Commission $20,000
Total Variable Cost $214,000
Fixed Cost Allocated
Manufacturing $130,000
Total Fixed Cost $130,000
Total Cost $344,000
Management decided that the required markup is 30%.
Required:
Question 1. What is the management accountant's role in setting price of a new product?
Question 2. List and explain 2 different pricing strategy that the business can use.
Question 3. What are some of the other factors that management need to consider while setting the price of the new cloth dryer.
Question 4. Calculate the selling price if the company decides to use absorption cost.
Question 5. Calculate the selling price if the company decides to price total variable cost.
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