COMMERCE 2AB3 Chapter Notes - Chapter 9: Takers, Profit Margin, Petro-Canada
4 Apr 2017
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Price takers: price is set by market forces i. e. imperial oil or petro-canada. Target cost: the cost that will provide the desired profit on a product when the seller does not have control over the product"s price. Total cost-plus pricing: a process in which a product"s selling price is determined by adding a markup to a total cost base. Markup: the percentage applied to a product"s cost to determine the product"s selling price. Target selling price: the selling price that will provide the desired profit on a product when the seller can determine the product"s price. As shown, the lower the budgeted volume, the higher the per-unit price. The opposite effect will occur if the budgeted volume is higher because the fixed costs and roi can be spread over more units. Absorption cost-plus pricing: an approach to pricing that defines the cost base as the manufacturing cost; it excludes both variable and fixed selling and administrative costs.
