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Chapter 15 - Flashcards

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Class:ACC 312 - FUNDAMENTALS OF MANAGERIAL ACC
Subject:Accounting
University:University of Texas - Austin
Term:Spring 2010
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four major influences of pricing decisions 1) customer demand 2) action of competitors 3) costs 4) political, legal, and image-related issues
demand curve shows relationship between sales price and quantity of units in demand
average revenue curve shows the average price at which any particular quantity can be sold
marginal revenue curve the change in total revenue tha accompanies a change in the quantity sold
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total cost curve graphs the relationship between total cost and quantity produced and sold each month
marginal cost curve the change in total cost that accompanies a change in quantity produced and sold
price elasticity the impact of price changes on sales volume
cross-elasticity the extent to which a change in a product's price affects the demand for other substitute products
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oligopolostic market a small number of sellers compete among themselves, the simple economic procong model is no longer appropriate
cost plus pricing the price is equal to cost plus a markup
return on investment pricing a cost plus pricing method in which the markup is determined by the amount necessary for the company to earn a target rate of return on investment
markup percentage on total cost target profit/ annual volume x total cost per unit
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markup cost on total variable cost target profit + total annual fixed cost/ annual volume x total variable cost per unit
skimming pricing the initial product price is set high, and short-term profits are reaped on the new product
penetration pricing Penetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.
target cosing the design of a product, and the process used to produce it, so that ultimatel the product can be manufactured at a cost that will enable a firm to make a profit when the product is sold at an estimated market-driven prce. This estimated price is called the target price, the desired profit margin is called the target profit, and the cost at which the product must be manufactured is called the target cost
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target cost the projected long-run product cost that will enable a firm to enter and remain in the market for the product and compete successfully with the firm's competitors, target price- target profit
value engineering cost reduction and process improvement technique that utilizes information collected about a product's design and production processes and then examines various attributes of the design nd processes to identify candidtes for improvement efforts
predatory pricing cutting a price to broaden demand for a product with the intention of later restricting the supply and raising the price again.
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 four major influences of pricing decisions1) customer demand 2) action of competitors 3) costs 4) political, legal, and image-related issues
 demand curveshows relationship between sales price and quantity of units in demand
 average revenue curveshows the average price at which any particular quantity can be sold
 marginal revenue curvethe change in total revenue tha accompanies a change in the quantity sold
 total cost curvegraphs the relationship between total cost and quantity produced and sold each month
 marginal cost curvethe change in total cost that accompanies a change in quantity produced and sold
 price elasticitythe impact of price changes on sales volume
 cross-elasticitythe extent to which a change in a product's price affects the demand for other substitute products
 oligopolostic marketa small number of sellers compete among themselves, the simple economic procong model is no longer appropriate
 cost plus pricingthe price is equal to cost plus a markup
 return on investment pricinga cost plus pricing method in which the markup is determined by the amount necessary for the company to earn a target rate of return on investment
 markup percentage on total costtarget profit/ annual volume x total cost per unit
 markup cost on total variable costtarget profit + total annual fixed cost/ annual volume x total variable cost per unit
 skimming pricingthe initial product price is set high, and short-term profits are reaped on the new product
 penetration pricingPenetration pricing is the pricing technique of setting a relatively low initial entry price, often lower than the eventual market price, to attract new customers.
 target cosingthe design of a product, and the process used to produce it, so that ultimatel the product can be manufactured at a cost that will enable a firm to make a profit when the product is sold at an estimated market-driven prce. This estimated price is called the target price, the desired profit margin is called the target profit, and the cost at which the product must be manufactured is called the target cost
 target costthe projected long-run product cost that will enable a firm to enter and remain in the market for the product and compete successfully with the firm's competitors, target price- target profit
 value engineering cost reduction and process improvement technique that utilizes information collected about a product's design and production processes and then examines various attributes of the design nd processes to identify candidtes for improvement efforts
 predatory pricingcutting a price to broaden demand for a product with the intention of later restricting the supply and raising the price again.
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