At one of its regular monthly meetings the board of Giant Steps Ltd was discussing its pricing
Question:
At one of its regular monthly meetings the board of Giant Steps Ltd was discussing its pricing and output policies. Giant Steps Ltd is a multi-product firm, operating in several distinct but related competitive markets. It aims to maximize profits.
You are required to comment critically and concisely on any tour of the following six statements which were included in the taped record of the meeting:
(a) Profit is maximized by charging the highest possible price.
(b) The product manager's pricing policy should be to set a price which will maximize demand, by ensuring that contribution per unit is maximized.
{c) Allocation of overheads and joint costs enables management to compare performance between products, projects, or divisions.
(d) Allocation of overheads and joint costs is a way of accountants grabbing power and influence from marketing and production people.
(e) Our management accounts must be consistent with our published accounts, so we must follow SSAP 9 on overhead allocation.
(ij Expenditure on Research and Development would be a past or sunk cost, and no matter what decision about output or price was eventually made it would have no bearing on the recovery of that expenditure
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