Chapter 25: 8RQ (page 1406)
What questions should managers answer when setting regular prices?
The managers must answer three major questions when settingregular prices: the company's target profit, the customer's ability to pay, and the perception of setting the price.
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What is differential analysis?
You are trying to decide whether to trade in your inkjet printer for a more recent model. Your usage pattern will remain unchanged, but the old and new printers use different ink cartridges.
Indicate if the following items are relevant or irrelevant to your decision:
a. The price of the new printer
b. The price paid for the old printer
c. The trade-in value of the old printer
d. Paper cost
e. The difference between ink cartridges’ costs
List the four steps in short-term decision making. At which step are managerial accountants most involved?
What questions should managers answer when considering special pricing orders?
Moore Company sells both designer and moderately priced fashion accessories. Top management is deciding which product line to emphasize. Accountants have provided the following data:
Per Item
Designer Moderately Priced
Average sales price \(185 \)87
Average variable costs 105 22
Average contribution margin 80 65
Average fixed costs (allocated) 20 10
Average operating income \(60 \)55
The Moore Company store in Grand Junction, Colorado, has 14,000 square feet of floor space. If Moore Company emphasizes moderately priced goods, it can display 840 items in the store. If Moore Company emphasizes designer wear, it can display only 560 designer items. These numbers are also the average monthly sales in units.
Prepare an analysis to show which product the company should emphasize.
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