tailieunhanh - Lecture Advanced management accounting - Chapter 22

After studying this chapter, you should be able to: assign costs to a cost object using a second-stage allocation, use activity-based costing to compute product and customer margins, prepare an action analysis report using activity-based costing data and interpret the report. | Lecture 22: Cost-Based Decision Making Managerial Accounting 6th edition by Weygandt, kimmel, kieso Pricing and Business How companies price a product or service ultimately depends on the demand and supply for it Three influences on demand & supply: Customers Competitors Costs 2 2 Influences on Demand & Supply Customers – influence price through their effect on the demand for a product or service, based on factors such as quality and product features Competitors – influence price through their pricing schemes, product features, and production volume Costs – influence prices because they affect supply (the lower the cost, the greater the quantity a firm is willing to supply) 3 3 Time Horizons and Pricing Short-run pricing decisions have a time horizon of less than one year and include decisions such as: Pricing a one-time-only special order with no long-run implications Adjusting product mix and output volume in a competitive market Long-run pricing decisions have a time horizon of one year or longer and include decisions such as: Pricing a product in a major market where there is some leeway in setting price 4 4 Differences Affecting Pricing: Long Run vs. Short Run Costs that are often irrelevant for short-run policy decisions, such as fixed costs that cannot be changed, are generally relevant in the long run because costs can be altered in the long run Profit margins in long-run pricing decisions are often set to earn a reasonable return on investment – prices are decreased when demand is weak and increased when demand is strong 5 5 Alternative Long-Run Pricing Approaches Market-Based: price charged is based on what customers want and how competitors react Cost-Based: price charged is based on what it cost to produce, coupled with the ability to recoup the costs and still achieve a required rate of return 6 6 ABC Manufacturing Cost Illustration 7 7 Product Profitability Using ABC Costing: Illustration 8 8 Markets and Pricing Competitive Markets - use the . | Lecture 22: Cost-Based Decision Making Managerial Accounting 6th edition by Weygandt, kimmel, kieso Pricing and Business How companies price a product or service ultimately depends on the demand and supply for it Three influences on demand & supply: Customers Competitors Costs 2 2 Influences on Demand & Supply Customers – influence price through their effect on the demand for a product or service, based on factors such as quality and product features Competitors – influence price through their pricing schemes, product features, and production volume Costs – influence prices because they affect supply (the lower the cost, the greater the quantity a firm is willing to supply) 3 3 Time Horizons and Pricing Short-run pricing decisions have a time horizon of less than one year and include decisions such as: Pricing a one-time-only special order with no long-run implications Adjusting product mix and output volume in a competitive market Long-run pricing decisions have a time horizon of one