9 - Pricing

Question 1

External pricing : price takers
(can’t accept the price, the market sets it)

Answer 1

accept price & control costs
- focus on lowering your target costs

Target costs = Market SP - desired profit

Question 2

External pricing: Price setter: cost plus pricing approach

Answer 2

1. Full cost plus pricing
2. Absorption cost + pricing
3. Variable cost+ pricing
   4.wtvvv

Question 3

Time and material pricing

Question 4

Full cost plus pricing formula

Answer 4

Total cost per unit + (markup% * Total cost per unit)

markup % = Desired ROI per unit/ Total cost per unit

Question 5

Desired ROI per unit

Answer 5

($ invested * ROI%) / units produced

Question 6

Variable cost plus pricing approach

Answer 6

Variable cost per unit + (markup %/variable cost per unit)

markup% = Desired ROI per unit+ FOHu+FSEu/Variable cost per unit

Question 7

Absorption cost plus pricing approach

Answer 7

Manufacturing costs per unit + (markup % / manufacturing costs per unit)

Markup% = desired ROI per unit + VSEu + FSEu / manufacturing costs per unit

Question 8

Internal pricing steps

Answer 8

1. identify which division is a seller and which is a buyer
2. do we have available cap? make capacity schedule
3. Calculate MinTP
4. do we accept?

Question 9

benefits of the selling division

Answer 9

(offer - MinTP) * units transferred

Question 10

benefits of the buying division

Answer 10

(MaxTP-offer) *units transferred

Question 11

Formulas MinTP

Answer 11

VCint + ((SP-VCext)/units produced) * units given up on external sales

Question 12

if we produce at capacity it means

Answer 12

available capacity= 0

Question 13

difference between VCint and VCext

Answer 13

dont include VSE in VCint.
See if any VC is avoidable when internally transferring.