管理会计英语6ppt课件.ppt

CostInformationforPricingandProductPlanning Chapter6 RoleOfProductCostsInPricingAndProductMixDecisions Understandinghowtoanalyzeproductcostsisimportantformakingpricingdecisions ManagersmakedecisionsaboutestablishingoracceptingapricefortheirproductsEvenwhenpricesaresetbythemarketandthefirmhaslittleornoinfluenceonproductprices managementstillhastodecidethebestmixofproductstomanufactureandsell RoleofProductCosts ProductcostanalysisisalsosignificantwhenafirmisdecidinghowbesttodeploymarketingandpromotionresourcesHowmuchcommission orhowmanyotherincentives toprovidethesalesforcefordifferentproductsHowlargeadiscounttoofferofflistprices Short termandLong termPricingConsiderations Thecostsofmanyresourcesarelikelytobecommittedcostsintheshort termbecausefirmscannoteasilyalterthecapacitiesmadeavailableformanyproductionandsupportactivitiesForshort termdecisions itisimportanttonotewhethersurpluscapacityisavailableforadditionalproduction orwhethershortagesofavailablecapacitylimitadditionalproductionalternatives Short termandLong termPricingConsiderations Thelengthoftimeafirmmustcommititsproductioncapacitytofillthatorderisimportantbecausealong termcapacitycommitmenttoamarginallyprofitableordermay Preventthefirmfromdeployingitscapacityformoreprofitableproductsororders shoulddemandforthemariseinthefutureForcethefirmtoaddexpensivenewcapacitytohandlefuturesalesincreases Short termandLong termPricingConsiderations Ifproductionisconstrainedbyinadequatecapacity managersneedtoconsiderwhetherovertimeproductionortheuseofsubcontractorscanhelpaugmentcapacityintheshorttermInthelongterm managershaveconsiderablymoreflexibilitytoadjustthecapacitiesofactivityresourcestomatchthedemandfortheminproducingvariousproductsDecisionsaboutwhethertointroducenewproductsoreliminateexistingproductshavelong termconsequences AbilityToInfluencePrices Ifthefirmisoneofalargenumberoffirmsinanindustry andifthereislittletodistinguishtheproductsofdifferentfirmsfromeachother Suchafirmisapricetaker anditchoosesitsproductmixgiventhepricessetinthemarketplaceforitsproducts AbilityToInfluencePrices Firmsinanindustrywithrelativelylittlecompetition whoenjoylargemarketsharesandexerciseindustryleadership mustdecidewhatpricestosetfortheirproductsFirmsinindustriesinwhichproductsarehighlycustomizedorotherwisedifferentiatedfromeachotheralsoneedtosetthepricesfortheirdifferentiatedproductsSuchfirmsarepricesetters PriceTakers Asmallfirm orafirmwithanegligiblemarketshareinthisindustry behavesasapricetakerIttakestheindustrypricesforitsproductsasgivenandthendecideshowmanyunitsofeachproductitshouldproduceandsell Short TermDecisionsforPriceTakers ApricetakershouldproduceandsellasmuchasitcanofallproductswhosecostsarelessthanindustrypricesManagersmustdecidewhichcostsarerelevanttotheshort termproductmixdecisionManagersmayhavelittleflexibilitytoalterthecapacitiesofsomeofthefirm sresourcesintheshort run Example GarmentManufacturer ChunlingCompanythatsellsfivetypesofready madegarmentstodiscountstoressuchasKmartandWal MartThecompanyisoperatingatfullcapacityandiscontemplatingshort termadjustmentstoitsproductmixItisnecessaryforthecompanytodetermine WhatcostswillvarywithproductionlevelsinthisperiodWhatcostswillremainfixedwhenachangeoccursintheproductionmix Example GarmentManufacturer Thecostsofutilities plantadministration maintenance anddepreciationforthemachineryandplantfacilitywillnotalterwithachangeintheproductmix becausetheplantisoperatingatfullcapacityVaryingwiththequantityofeachgarmentproducedare ThecostsofdirectmaterialsThedirectlaborthatispaidonapiece ratebasisInspectorsarepaidamonthlyfixedsalary buttheyareemployedasrequiredtosupporttheproductionofdifferentgarments Example GarmentManufacturer Ifitscapacitywereunlimited thecompanycouldproducegarmentstofillthemaximumdemandforthemCapacityisconstrained however andthereforethecompanymustdecidehowbesttodeploythislimitedresourceThecapacityisfixedintheshort term sothecompanymustplanproductiontomaximizethecontributiontoprofitearnedforeveryavailablemachinehourused TheImpactOfOpportunityCosts Ifthegarmentmanufacturerreceivesaspecialorderrequest itwouldhavetodecidetheminimumpriceitwouldacceptBecauseitsproductioncapacityislimited thecompanymustcutbacktheproductionofsomeothergarmenttoenableittoproducethegoodsforthespecialorderGivinguptheproductionofsomeprofitableproductresultsinanopportunitycost whichequalsthelostprofitonthegarmentsthatthecompanycannolongermake TheImpactOfOpportunityCosts ThelostprofitinthiscasewouldbethecontributiononthegoodsitwillnotmakeTheproductwiththelowestcontributionperhourshouldbesacrificedTheprofit contribution lostonthoseproductswouldneedtobecoveredbythepriceofthespecialorder Short TermPricingDecisionsforPriceSetters Inmanybusinesses potentialcustomersrequestthatsuppliersbidapriceforanorderbeforetheydecideonthesupplierwithwhomtheywillplacetheorder DeterminingaBidPrice Assumethatthefullcostsforthejobareestimatedtobe 28 500Settingthepriceofaproductalsomeansdeterminingamarkuppercentageabovecost anapproachknownascost pluspricingCost pluspricing themarkuppercentageisdeterminedbyacompany sdesiredprofitmarginandoverallrateofreturnThecompanyhasdecidedthemarkuppercentageisnormallytobe40 offullcosts DeterminingaBidPrice Ifthebidrequestcamefromaregularcustomer thebidpricewouldhavebeen 39 9001 40 x 28 500Butforthisspecialorderfromanewcustomer whatistheminimumacceptableprice Oneofthecriticalfactorstoconsideristhelevelofavailablesurpluscapacity AvailableSurplusCapacity Thecompany sincrementalcostsoffillingtheorderwillbe 22 000 material directlabor batchrelatedexpenses Thecostsofsupervisionandbusiness sustainingsupportactivitieswillnotincreaseifexcesscapacityoftheseresourcesisavailabletomeettheproductionneedsoftheorderThepricethatthecompanyshouldbidmustcovertheincrementalcostsforthejobtobeprofitableThecompanywouldlikelyaddaprofitmarginaboveincrementalcostsandmakethebidpricesomethinghigherthan 22 000 dependingoncompetitiveanddemandconditions NoAvailableSurplusCapacity Ifsurplusmachinecapacityisnotavailable thecompanywillhavetoincuradditionalcoststoacquiretheneededcapacityCompaniesoftenmeetsuchshort termcapacityrequirementsbyoperatingitsplantovertimeMoremachinemaintenanceandplantengineeringactivitieswillbenecessary NoAvailableSurplusCapacity thecompanyincursadditionalrentalcostsfortheextrauseofmachineswhenitaddsanovertimeshiftAssumemanagementestimatestheorderwouldcause 5 100ofincrementalsupervisioncosts includingovertimepremium 5 400ofincrementalbusiness sustainingcostsThus thetotalcostofovertimerequiredtomanufacturecustomizedtoolsfortheorderis 10 500 5100 5400 NoAvailableSurplusCapacity Theminimumacceptablepriceinthiscaseis 32 500 22 000 10 500 Theminimumacceptablepricemustcoverallincrementalcosts Long TermPricingDecisionsforPriceSetters Therelevantcostsfortheshort termspecialorderpricingdecisiondifferfromthefullcostsofthejobMostfirmsrelyonfull costinformationreportswhensettingprices UseofFullCostsinPricing Economicjustificationforusingfullcostsforpricingdecisionsinthreetypesofcircumstances Manycontractsforthedevelopmentandproductionofcustomizedproductsandmanycontractswithgovernmentalagenciesspecifythatpricesshouldequalfullcostsplusamarkup andpricessetinregulatedindustriesarebasedonfullcostsWhenafirmentersintoalong termcontractualrelationshipwithacustomertosupplyaproduct ithasgreatflexibilityinadjustingthelevelofcommitmentforallresources UseofFullCostsinPricing Mostactivitycostswilldependontheproductiondecisionsunderthelong termcontract andfullcostsarerelevantforthelong termpricingdecisionInmanyindustries firmsmakeshort termadjustmentsinprices oftenbyofferingdiscountsfromlistpricesinsteadofrigidlyemployingafixedpricebasedonfullcostsWhendemandfortheirproductsislow thefirmsrecognizethegreaterlikelihoodofsurpluscapacityintheshortterm UseofFullCostsinPricing TheyadjustthepricesoftheirproductsdownwardtoacquireadditionalbusinessbasedonthelowerincrementalcoststheyincurwhensurpluscapacityisavailableWhendemandfortheirproductsishigh theyrecognizethegreaterlikelihoodthattheexistingcapacityofactivityresourcesisinadequatetosatisfyallofthedemandTheyadjustthepricesupwardbasedonthehigherincrementalcoststheyincurwhencapacityisfullyutilize therebyrationingtheavailablecapacitytothehighestprofitopportunity FluctuatingPrices Becausedemandconditionsfluctuateovertime pricesalsofluctuatewithdemandconditionsovertimeMosthotelsofferspecialweekendratesthatareconsiderablylowerthantheirweekdayratesManyamusementparksofferlowerpricesonweekdayswhendemandisexpectedtobelowAirfaresbetweenNewYorkandLondonarehigherinsummer whenthedemandishigher thaninwinter whenthedemandislowerLong distancetelephoneratesarelowerintheeveningsandontheweekendswhenthedemandislower FluctuatingPrices Althoughfluctuatingshort termpricesarebasedontheappropriateincrementalcosts overthelongtermtheiraveragetendstoequalthepricebasedonthefullcoststhatwillberecoveredinalong termcontractMostfirmsusefullcost basedpricesastargetprices givingsalesmanagerslimitedauthoritytomodifypricesasrequiredbytheprevailingcompetitiveconditions TheMarkupRate Justaspricesdependondemandconditions markupsincreasewiththestrengthofdemandMarkupsalsodependontheelasticityofdemandMarkupsalsofluctuatewiththeintensityofcompetition TheMarkupRate Firmsdecideonmarkupsforstrategicreasons AfirmmaychoosealowmarkupforanewproducttopenetratethemarketandwinovermarketsharefromanestablishedproductofacompetingfirmManyinternetbusinesseshaveadoptedthestrategyofsettinglowpricestobuildthebusiness acquireabrandname buildaloyalcustomerbase andgarnermarketshareFirmssometimesemployaskimmingpricestrategywhereinitiallyahigherpriceischargedtocustomerswhoarewillingtopaymorefortheprivilegeofpossessingthelatesttechnologicalinnovations Long TermDecisionsforPriceTakers Decisionstoaddanewproductortodropanexistingproductfromtheportfolioofproductsusuallyhavesignificantlong termimplicationsforafirm scoststructureProduct sustainingcostsarerelevantcostsforsuchdecisionsBatch relatedcostsarealsolikelytoalterifachangeoccursintheproductmixeitherinfavoroforagainstproductsmanufacturedinlargebatches ProfitIncreaseisNotAutomatic Droppingproductswillhelpimproveprofitabilityonlyifthemanagers Eliminatetheactivityresourcesnolongerrequiredtosupportthediscontinuedproduct orRedeploytheresourcesfromtheeliminatedproductstoproducemoreoftheprofitableproductsthatthefirmcontinuestoofferCostsresultfromcommitmentstosupplyactivityresourcesTheydonotdisappearautomaticallywiththedroppingofunprofitableproductsOnlywhencompanieseliminateorredeploytheresourcesthemselveswillactualexpensesdecrease Summary ManagersusecostinformationtoassisttheminpricingandinproductmixdecisionsThemannerinwhichtheyusecostinformationinmakingthesedecisionsdependonwhetherthefirmisamajororminorentityinitsindustryTheroleofcostinformationalsodependsonthetimeframeinvolvedinthedecision EconomicAnalysisofthePricingDecision Appendix6 1 QuantityDecision Introductorytextbooksineconomicsusuallyanalyzetheprofitmaximizationdecisionbyafirmintermsofthechoiceofaquantitytoproduce Inturn thequantitychoicedeterminesthepriceoftheproductinthemarketplaceEconomistspresentthequantitychoiceintermsofequatingmarginalrevenueandmarginalcost QuantityDecision Thefirmchoosesthequantitylevel andthemarketdemandconditionsdeterminethecorrespondingpriceThefirmthatmustchooseaprice notaquantity toannouncetoitscustomersCustomersreacttothepriceannouncedanddeterminethequantitythattheydemandThepricedecisionanalysisusesdifferentialcalculustoanalyzethefirm spricingdecision PricingDecision Totalcosts C expressedintermsofitsfixedandflexiblecostcomponentsare C f vQ Wherefisthecommittedcost vistheflexiblecostperunit andQisthequantityproducedinunitsQuantityproducedisassumedtobethesameasquantitydemandedThedemand Q isrepresentedasadecreasinglinearfunctionofthepriceP Q a bPAhighervalueofbrepresentsademandfunctionthatismoresensitive elastic toprice PricingDecision AnincreaseofadollarinthepricedecreasesdemandbybunitsAhighervalueofareflectsagreaterstrengthofdemandforthefirm sproduct Foranygivenprice P thedemandisgreaterwhentheparameter a hasahighervalueThetotalrevenue R isgivenbytheprice P multipliedbythequantitysold Q Algebraically wewritethis R PQ P a bP aP bP2Theprofit ismeasuredasthedifferencebetweentherevenue R andthecost C PricingDecision R C PQ f vQ P a bP F v a bP aP bP2 F va vbPTofindtheprofit maximizingprice P wesetthefirstderivativeofprofitPwithrespecttoPequaltozero d dP A 2bP vb 0Thisequationimplies P a vb 2b a 2b v 2 Long TermBenchmarkPrices Thissimpleeconomicanalysissuggeststhatthepricedependsonlyonv theflexiblecostperunitAmorecomplexanalysisthatconsiderssimultaneouslythepricingdecisionandthelong termdecisionsofthefirmtocommitresourcestofacility sustaining product sustaining andotheractivitycapacitiesindicatesthatthecostsofthesecommittedresourcesdoplayaroleinthepricingdecisionThecostsofthesecommittedactivityresourcesappeartobecommittedcostsintheshort term buttheycanbechangedinthelong term Long TermBenchmarkPrices 2of2 Thepricesthatafirmsetsandadjustsintheshortterm basedonchangingdemandconditions fluctuatearoundalong termbenchmarkprice pL thatreflectstheunitcostsoftheactivityresourcecapacities pL a 2b v m 2m f Xisthecostperunitofnormalcapacity