ACCT 001 Lecture Notes - Lecture 25: Profit Margin, Finished Good, Financial Statement
23 Dec 2020
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Document Summary
Managements adopts a target costing approach uses competitive market data to determine what the optimum price of a product should be. They then subtract a desired profit margin from that price target" cost. An organisation needs an effective management accounting system to constantly monitor and tightly control the resources it uses in the production process: product differentiation: as a product"s price increases, consumer demand for it generally declines. Managers need to understand both the market demand and cost structures of their products at various production levels in order to optimise their returns. Pricing and costing of products are fundamentally important aspects of management. If management does not accurately determine the cost of their products and either overprice or under-price products, consumers will decrease, and shareholders will not receive the returns desired. 3 categories of organisations: manufacturing, merchandising or services: manufacturing organisations.
