Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Case Study: Strategic pricing of new product ABC Limited manufactures high quality copper pots and pans. Company's management accountant is involved in setting price for

Case Study: Strategic pricing of new product ABC Limited manufactures high quality copper pots and pans. Company's management accountant is involved in setting price for the company's new Starter Set. This set consist of seven of the most commonly used pots and pan. During the next year, the company plans to manufacturer 10,000 Starter Sets. The management accountant gathered the following information regarding the cost of developing 10,000 Starter Set.

Variable Costs:

Manufacturing $75,000

Sales Commission $15,000

Total Variable Cost $90,000

Fixed Cost Allocated

Manufacturing $25,000

Total Fixed Cost $25,000

Total Cost $115,000

Management decided that the required markup is 40%.

Required:

1. What is the management accountant's role in setting price of a new product? (5 marks)

2. Discuss the factors that management need to consider while setting the price of the new Starter Set. (5 marks)

3. Determine the selling price if the company decides to use absorption cost. (5 marks)

4. Determine the selling price if the company decides to use total variable cost. (5 marks)

5. Write an explanation to the management of ABC Limited, the impact of pricing strategies on business profitability and success.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting For Decision Making And Control

Authors: Jerold Zimmerman

10th Edition

1259969495, 978-1259969492

More Books

Students also viewed these Accounting questions