ACCT 3130 Chapter 13

___ influence price through their effect on the demand for a product or service, based on factors such as product features & quality

___ influence price through their technologies, plant capacities, and operating strategies which affect their costs.

___ influence prices because they affect supply. The lower the ___, the greater the quantity a firm is willing to supply.

___ pricing decisions have a time horizon of less than one year.

Pricing a one-time-only special order.

• Short-Run Pricing

• Luring customer in the door

• Cost based on VC & FC

• Cost based on VC

• Profit = 0

A strategic decision designed to build relationships with customers.

• Short-Run Pricing

• Long-Run Pricing

• Stable & Predictable Prices

• Costing Based on VC & FC

• Where Profit is Not 0

The first step of implementing target pricing & target costing:

• Develop a product that satisfies the needs of potential customers

• Choose a target price

• Derive a target cost/unit by subtracting target OI/unit from the target price

• Perform cost analysis

• Perform value engineering to achieve target cost

The second step of implementing target pricing & target costing:

• Develop a product that satisfies the needs of potential customers

• Choose a target price

• Derive a target cost/unit by subtracting target OI/unit from the target price

• Perform cost analysis

• Perform value engineering to achieve target cost

The third step of implementing target pricing & target costing:

• Develop a product that satisfies the needs of potential customers

• Choose a target price

• Derive a target cost/unit by subtracting target OI/unit from the target price

• Perform cost analysis

• Perform value engineering to achieve target cost

The fourth step of implementing target pricing & target costing:

• Develop a product that satisfies the needs of potential customers

• Choose a target price

• Derive a target cost/unit by subtracting target OI/unit from the target price

• Perform cost analysis

• Perform value engineering to achieve target cost