Pricing Strategies

Question 1

Part ai

Answer 1

Mc= variable cost (L + M + variable overhead)
AC= MV + fixed cost per unit (fixed costs/budgeted units)

Cost plus sell price= AC x mark up (should be in table)

Demand= in table
Closing inventory= budgeted - demand

Question 2

aii

PROFIT USING AC PRINCIPLES

Answer 2

PROFIT USING AC PRINCIPLES
sales (demand x cost plus)
Open inv x
+Prod costs (AC x budgeted units) -
-Clos inv ((Clos inv x AC))
Cost of sales Number
PROFIT =

Question 3

aiii

PROFIT USING MC PRINCIPLES

Answer 3

PROFIT USING MC PRINCIPLES
Sales (Demand x cost plus)
Open inv
+Produ cost (MC x budgeted units) -
-Clos inv ((Clos inv x MC))
Marg COS number
Contrib number
Total fixed cost (From q)
PROFIT

Question 4

Reconciliation of profit

Answer 4

AC PROFIT=
-
MC PROFIT=
Number

Demand or Clos inv x fixed cost per unit

Fixed cost per unit (AC-MC)

Question 5

B.

Answer 5

-Demand
(From table)

-SP
(From table)

-MC

-contribution
(SP-MC)

-total contribution
(Demand x contrib)

-total fixed costs
(From table)

-total profit
(TC-TFC)

-> HIGHEST PROFIT

Profit maximising sell price=
Giving maximum profit=
Sales of units=