Why different pricing policies appropriate in circumstances

Reference no: EM131007181

"Leisure Furniture Ltd produces furniture for hotels and public houses using specific designs prepared by firms of interior design consultants. Business is brisk and the market is highly competitive with a number of rival companies tendering for work. The company's pricing policy, based on marginal costing (variable costing) techniques, is generating high sales.

The main activity of Home Furniture Ltd is the production of a limited range of standard lounge suites for household use. The company also offers a service constructing furniture to customers' designs. This work is undertaken to utilise any spare capacity. The main customers of the company are the major chains of furniture retailers. Due to recession, consumer spending on household durables has decreased recently and, as a result, the company is experiencing a significant reduction in orders for its standard lounge suites. The market is unlikely to improve within the next year. The company's pricing policy is to add a percentage mark-up to total cost. "

Required :-

Explain why different pricing policies may be appropriate in different circumstances, illustrating your answer by reference to Leisure Furniture Ltd and Home Furniture Ltd. (500 words)

Reference no: EM131007181

Questions Cloud

Compute the unit product cost : The company applies manufacturing overhead on the basis of machine hours. The predetermined overhead rate is $18 per machine hour. Compute the unit product cost that would appear on the job cost sheet for this job.

Determine effect on aggregate output-consumption-employment : Suppose that there is a natural disaster that destroys part of the nations capital stock. Determine the effect on aggregate output, consumption, employment, and the real wage, with reference to income and substitution effects, and explain your result..

Develop the essential analytical and problem solving skills : Develop the essential analytical and problem solving skills required of lawyers and, more immediately, that will be important for your law exams.

About the one-period macroeconomic model : The following questions are about the one-period macroeconomic model discussed in class. Notice that nothing has been specified about the preferences of the consumer or the production technology of the firm. Suppose there is a new production technolo..

Why different pricing policies appropriate in circumstances : Explain why different pricing policies may be appropriate in different circumstances, illustrating your answer by reference to Leisure Furniture Ltd and Home Furniture Ltd

What are some of the major tasks that should be accomplished : A e audit report and post audit follow-up are important steps in the audit process, what are some of the major tasks that should be accomplished by the audit in these steps?

Correct about comparative advantage : Which of the following is correct about comparative advantage?

Problem regarding the patient forms : Patient forms. The medical facility in Exercise 27 also keeps track of the number of errors found when transcribing information from patient forms. Last year the average num- ber of errors was 1.26 per day which the facility found ac- ceptable. He..

Considering the possibility of building additional factory : Expando, Inc., is considering the possibility of building an additional factory that would produce a new addition to their product line. The company is currently considering two options. The first is a small facility that it could build at a cost of ..

User Account

All Pages