MGT 5 Chapter Notes - Chapter 8: Variable Cost, Takers, Opportunity Cost
29 Jul 2017
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Lo 1: compute a target cost when the market determines a product price. In the long run, a company must price its product to cover its costs and earn a reasonable profit. Price takers: the prices of their goods are set by market forces (supply and demand of the good) Target cost: provides a desired profit, calculated with the formula: market - desired profit = target cost. Lo 2: compute a target selling price using cost-plus pricing. Cost-plus pricing: when a company sets a product price, it does so as a function of, or relative to, the cost of the product or service. Target selling price: the optimal selling price. Cost + markup = target selling price. Full-cost pricing: calculating the cost base by including all costs incurred. Variable-cost pricing: basis for setting prices, avoids the problem of using uncertain cost information. Lo 3: use time-and-material pricing to determine the cost of services provided.
