• Explain the role of costs, customers, competitors and constraints in determini
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Question
• Explain the role of costs, customers, competitors and constraints in determining prices.
• What are the steps in determining prices based on cost?
• What factors influence a customer's willingness to pay a particular price for a product?
• What types of competitive markets exist for products? How do they influence the prices that can be set?
• Cost behavior; definitions of fixed, variable, semi-variable, per unit and in total. Graphs and equations of each. Behavior Cost estimation methods; compare/contrast High-Low with Regression Analysis.
• Breakeven/CVP analysis. Definitions & COMPUTATION OF BREAK EVEN AND DESIRED BEFORE TAX PROFIT IN UNITS.
• That are contribution margin and contribution margin per unit? How are these used to determine a contribution margin ratio?
• Sensitivity analysis. What happens to breakeven as the variables are changed?
Explanation / Answer
1,2a) the main constraint on pricing are cost, customers, and compitetors. Cost means expenses. So low cost profile is to decide the price also low price. In other words price fixing is almost depending on the cost of factors of production . Low cost of factors of production causes the low price. Customer satisfaction is depend on the different pricing policy ex.market penetration and market skimming police s etc.competition based pricing policy a co, sets its prices by determining what other co, operating in the market charge.
3a) The galue based pricing strategy are to p more interest to customers willing ness to pay a particular price for a product. Its not a creating customer satisfaction may be achieve d through discount ing alone, a pricing strategy that could also lead to greater sales.
4a) Two type s of market s are there perfect and imperfect markets. In perfect market wise price is fixed on the basis of demand and supply. Imperfect or monopoly market price fixing is based on the monopoliest way of thinking that is max price.
5a) Fixed cost is always fixed when the production is taken up or not we must pay that cost is known as fixed cost. Variable cost is vary. When the production is temporarily suspended we didn't pay any cost that cost is variable cost.
6a) BEP Break even analysis are BEPpoint analysis mean no profit no loss point cvp mean cost-volume-profit analysis BEP also deals the cvp so BEP also knows as cvp analysis.
7a) Contribution margin is the margin between BEP sales and total sales. Contribution margin per unit is sp per unit minus vc per unit.
8a) variable are changed BEP point also change.
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