Page 300 - DMGT403_ACCOUNTING_FOR_MANAGERS

Unit 14: Pricing Decision

14.6 Summary Notes

Pricing which is part of the overall marketing strategy plays a very critical role in the
success of a company as it is able to increase the profitability and or increase the market
share
Before determining prices certain important factors should be taken care of.
The various methods of pricing include the following: Full cost pricing; Variable/Marginal
Cost Plus pricing; Rate of Return Pricing; Break-even Pricing; Minimum Pricing, etc.

14.7 Keywords

Marginal Cost Pricing: Under marginal Cost pricing, selling price is determined by adding a
mark up or margin on the total variable costs (marginal cost).
Transfer Prices: Transfer prices are the amounts charged by one segment of an organization for
a product or service that it supplies to another segment of the same organization.
Marginal Costing Technique: Marginal costing technique helps in determining the most profitable
relationship between costs, prices and volume of business.

14.8 Self Assessment

Choose the appropriate answer:

1. Which of the following is not a method of pricing?
(i) Selling Price Plus (ii) Rate of Return Pricing
(iii) Break-even Pricing (iv) Minimum Pricing

2. What is the level of sales in Rupees at which the firm neither incurs a loss nor earns profit,
know as?
(i) BEP (Units) (ii) BEP (Volume)

(iii) BEP (Sales) (iv) BEP (budget)
Fill in the blanks:
3. Pricing ties very closely with the various stages of a ........................ .
4. ........................ Cost Pricing is a traditional method of pricing a product.
5. For minimum pricing, the selling price is the ........................ price that a company may sell
its product.
6. ........................ is a useful method in situations where there is a lot of intense competition.
7. The target rate of return varies with ........................ or what management considers a fair
return.
8. ........................ eliminates the difficulty of computing fixed costs into the products.
9. Multinational companies use ............................ to minimize their worldwide taxes, duties,
and tariffs.
10. Full Cost Pricing is a ................................. of pricing a product.
11. Pricing ties very closely with the various stages of a ...................................

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