Chapter 21 - Accounting
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17 Terms
Pricing Decision Factors
Cost, environment, and pricing objectives that affect pricing decisions.
Competitive Pricing
Prices are set by the market when products are similar.
Target Costing
Target Cost = Market Price − Desired Profit.
Cost-Plus Pricing
Setting price by adding a markup to total cost.
Markup
The amount added to cost to get the selling price.
Target Selling Price
Selling Price = Total Cost + Desired Profit.
Desired ROI per Unit
Profit added to each unit; same as markup.
Material Loading Charge
Extra costs for handling and storing materials.
Cost-Based Transfer Price
Transfer price based on production cost.
Transfer Pricing
Price used when divisions sell to each other.
Tax Effects on Transfer Pricing
Different tax rates make transfer pricing more complex.
Minimum Transfer
Variable Cost + Opportunity Cost.
Market-Based Transfer Pricing
Transfer price based on market price.
Full Cost
Variable + fixed manufacturing costs.
Excess Capacity
Extra production ability; no opportunity cost.
Absorption-Cost Approach
Includes all manufacturing costs.
Selling & Administrative Costs
Non-manufacturing costs not included in product cost.
