Question 6-32, Management Accounting 6th Edition

Pricing, customer profitability, managing customer relationships

Read the Wall Street Journal Article, Survival Strategies: After Cost Cutting, Companies Turn toward Price Increases, by Timothy Aeppel (September 18, 2002, p. A1). The article reports an all-out search for new ways to change more money without raising prices.

How did Jergens, Inc., use an activity-based costing approach to justify the price for an order of odd-size metal locating fasteners?

What issues arose in Goodyear Tire & Rubbers Pricing to distributors? What was Goodyears response?

What was the outcome of Emerson Electrics decision to depart from cost-based pricing? How can a product costing system contribute to under-costing a low-volume or customized product?

How did Wildeck influence customer to purchase products and services that are more profitable to Wildeck? What role should a cost-system play in such decisions?

Why was Union Pacific not concerned if it lost its less profitable customers? Will dropping unprofitable customers always lead to an immediate increase in profit?