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The Beauty Empires produces a special type of moisturizing lotion - baby lotion that is widely used by pediatrician to soothe and moisturize baby skin
The Beauty Empires produces a special type of moisturizing lotion - baby lotion that is widely used by pediatrician to soothe and moisturize baby skin at the hospital nursery room. For the month of October 2020, the following cost estimates have been made: Cost RM Direct materials 27.00 Direct labour 4 hours at RM5.00 per hour 20.00 Variable production overheads: 3.00 Machining - 1/2 hour at RM6.00 per hour 50.00 Additional information are given as follows: 1 Production fixed overheads are budgeted at RM300,000.00 per month and because of the shortage of available machining capacity, the company will be restricted to 10,000 hours of machine time per month. E The absorption rate will be a direct labour rate and budgeted direct labour hours are 25,000 per month. It is estimated that the company could obtain a minimum contribution of RM10.00 per machine hour on producing items other than the baby lotion. E The company wishes to make a profit of 20% on full production cost from baby lotion. Required: a. Determine the full cost-plus based price for the baby lotion (exclude machine time opportunity costs). b. Recalculate the full cost-plus based price In (a) considering machine time opportunity costs. c. Beauty Empires plan to launch a new product to the market next year and Is currently considering Its pricing strategy for this new product. The product will be unlike any other lotion avallable In the market. This unique position In the market place is expected to remain for only six months before one of the company's competitors develops a similar product. Explain three (3) types of pricing strategies that may be adopted when launching a new product
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