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Information is relevant when:
- (1) info must be an expected future revenue or cost
- (2) has an element of difference among the alternatives
A decision model is
any method used for making a choice
absorption approach is:
A costing approach that considers all indirect manufacturing costs to be product costs that become an expense in the form of manufacturing costs of goods sold only as sales occur.
contribution approach is:
A method of internal reporting that emphasizes the distinction between variable and fixed costs for the purpose of better decision making
Why is it wrong to label a fixed cost as a variable cost?
because the fixed cost will always be the same every year regardless of how much is sold.
Name 2 illegal + unethical pricing methods
- Predatory Pricing - lowering to drive out competition (Walmart)
- Discriminatory Pricing - charging different prices to different customers
When should you use Cost Plus Pricing?
when you have significant control over the sale price: because it allows you to set a markup amount.
When should you use Target Pricing
- When the market controls the Sale Price:
- You can then just figure in your desired profit.
- target price = market price - desired profit
Why is Target Pricing becoming more popular globally
because companies are becoming increasingly limited in influencing the market price.
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