19. As the marketing and sales manager, you are in charge of setting the selling

Question

19. As the marketing and sales manager, you are in charge of setting the selling prices of prize-winning music boxes with changeable songs. After you explained two cost-plus approaches to price setting, the CEO chose the straightforward approach of full-cost contact with a tight deadline. What information do you need immediately to arrive at a selling price that you can justify to the CEO? a. Value of resources consumed in the production of the music boxes. b. Overhead expenses, profit margin, and direct cost per music box. c. Fixed costs of production, variable costs, and revenue. d. Manufacturing capacity and customer's price point of willingness to pay. e. Acceptable loss-leader pricing, prescribed rate of return, and financing.

Explanation / Answer

Ans:d: Manufacturing capacity and Customers willingness to pay

The order isze is huge ( 10,000) as the case says the person feel like getting unexpected demand. Thus he need to understand the manufacturing capacity or capability of such units for delivery and the pricing part can be finalised based on the customer willingness to pay to meet such a huge demand within the tight schedule. Willingness to pay can be a factor of general market trend, product value ( as it says the music bo is an award winning one), thus an appreciation amount can be incorporated, actual cost and margin to be finalised based on it.

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