Solution-What are the potential problems with the cost

What are the potential problems with the cost based pricing

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Reference no: EM132618747

QMS has invested Rs. 50 million in refurbishing an existing facility to manufacture the new product. One production begins; the company estimates that it will incur fixed costs of Rs. 100 million. The variable cost to produce each device is estimated to be Rs. 12,500 and is expected to remain at that level for the output capacity of the facility. The company expects unit sales of 100,000 units. The company is using cost plus pricing (mark up pricing). QMS wants to earn a 25% markup on sales. QMS would be selling this product to consumers through wholesalers and retailers

Problem (1) Assume the actual sales 80,000 units that is lower than the expected sales, then what would be the impact of this lower sales on (1) unit cost, (2) Realized percentage markup on sales and (3) ROI

Note: Justify your answer by using figures given in the above case study.

Problem (2) What are the potential problems with these cost based pricing methods?

Reference no: EM132618747

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What are the potential problems with the cost based pricing

Reference no: EM132618747

Reference no: EM132618747

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