Illustrate the marginal cost pricing, Managerial Accounting

Assignment Help:

Marginal cost or incremental cost pricing method:

Here the company may work on the premise of recovering its marginal cost and getting a contribution towards its overheads. This method works well in a market already dominated by giant firms or characterized by intense competition and the objective of the firm is to get a foothold in the market.

In the example of shirts given above the variable cost is Rs 30 per shirt. As long as the firm is able to recover this cost and get a contribution towards its overheads, it is an acceptable pricing method. This will also work when the firm has an inventory of finished goods and it wants to liquidate it. At that time the prime concern is to recover the direct costs. The problem with this method is that it often sparks price wars which is not beneficial to any firm in the industry.

 


Related Discussions:- Illustrate the marginal cost pricing

Accounting for pension plans, how do i calculate the actuarial gains or los...

how do i calculate the actuarial gains or losses on the present value of plan obligations?

Market value-transfer pricing methods, Market value There is universal ag...

Market value There is universal agreement that in competitive markets a market value based transfer price should achieve optimal results. In this circumstance, it can be expected

Managerial Accounting, Computing equivalents units and assigning costs to c...

Computing equivalents units and assigning costs to completed units and ending work in process; no beginning inventory or cost transferred in (30 -45min) Sue Electronics makes CD p

Correlation coefficient, Correlation coefficient (r) Correlation coeffi...

Correlation coefficient (r) Correlation coefficient measures the degree of association between two variables such as the cost and the activity level. r = nΣxy   -  Σx  Σy

Lowering the average ticket price by 10 percent, Airlines give away million...

Airlines give away millions of tickets each year through their frequent flyer programs, with the typical airline awarding a free ticket for each 25,000 miles flown on the airline.

Determine the traditional classification, Determine the Traditional classif...

Determine the Traditional classification a) Balance sheet or position statement ratios: balances sheet ratios deal with the relationship among two balance sheet item e.g., th

Determine the value of equipment at the current date, A company is preparin...

A company is preparing a value in use calculation for a factory building and the equipment used to make a particular product. It has prepared cash flows for the next five years fro

The f–test , The F–test    The significance of the regression results...

The F–test    The significance of the regression results can be tested by using the F- statistics. The F-statistics is a ratio which compares the explained sum of squares and t

State the price determination under the market condition, State the price d...

State the price determination under the market condition The price determination under the following market condition is as follows: 1) Pure competition: in this situation

Jit purchasing arrangements-jit benefits, JIT purchasing arrangements J...

JIT purchasing arrangements JIT philosophy also extends to adapting JIT purchasing techniques whereby delivery of material immediately precedes their use. By arranging with sup

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd