The three major influences on pricing decisions are:
1. Customers, who influence price through their effect on demand for a product or service.
2. Competitors, who offer alternative or substitute products or services a
...
The three major influences on pricing decisions are:
1. Customers, who influence price through their effect on demand for a product or service.
2. Competitors, who offer alternative or substitute products or services a customer could choose.
3. Costs that affect the supply of a product or service.
12-2 Not necessarily. For a one-time-only special order, the relevant costs are only those
costs that will change as a result of accepting the order. In this case, full product costs will rarely
be relevant. It is more likely that full product costs will be relevant costs for long-run pricing
decisions.
12-3 Two examples of pricing decisions with a short-run focus:
1. Pricing for a one-time-only special order with no long-term implications.
2. Adjusting product mix and volume in a competitive market.
12-4 Activity-based costing helps managers in pricing decisions in two ways.
1. It gives managers more accurate product-cost information for making pricing decisions.
2. It helps managers to manage costs during value engineering by identifying the cost impact of
eliminating, reducing, or changing various activities.
12-5 Two alternative starting points for long-run pricing decisions are:
1. Market-based pricing, an important form of which is target pricing. The market-based
approach asks, “Given what our customers want and how our competitors will react to what
we do, what price should we charge?”
2. Cost-based pricing which asks, “Given what it costs us to make this product, what price should
we charge that will recoup our costs and achieve a required return on investment?”
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