ACTG 1P12 Lecture Notes - Lecture 10: Direct Labor Cost, Profit Margin, Transfer Pricing
Document Summary
For all the theory there is in the world about pricing, at the end of the day the most important thing is what the customers things the priced should be. If you can offer a lower price than that figure, then (cid:455)ou"re i(cid:374) (cid:271)usi(cid:374)ess. External sales: target costing, full costing, absorption costing, variable costing, time and material costing (service industry) Internal sales: transfer pricing, negotiations, cost-based, market-based. Market price desired profit = target cost. Lasik look produces and sells high-end gold equipment. The company has recently been involved in developing various types of laser guns to measure distance on the golf course. The potential market for one small laser gun appears to be very large. Because of competition, they do not believe they can charge more than for it. At this price, they believe they can sell. The small laser gun costs million to manufacture and the company wants a return on investment of 20%.
