Case Study of Manac Plc
Introduction
Manac plc, is a big company which produces and sells a range of standard electrical goods. It is a multinational company whose production and sales take place across a number of countries. Current the company is using the standard costing and absorption costing as part of its approach to strategic management accounting.
But now it is worried about that the company is not meeting its budgeted target profits. The reason for the lower than expected profits may be very complex and the report is produced to explain the flowing: i. The models and concepts affecting the pricing decision and their usefulness ii. The role of variance analysis in management accounting and its limitation. iii. The advantages and disadvantages of introducing an Activity Based Costing system to replace the current Absorption Costing system. Pricing decision
Pricing decision is crucial and tricky: if the prices of our goods are set too high, customers will not buy our product and will choose the products of other companies instead. But if the prices are set too low, our cost will not be covered and thus we will be losing money. The problem the company has now may be attributed to pricing decision, so firstly I will introduce two decision making models along with a wide range of concepts concerning pricing decisions.
When making pricing decisions, many factors have to be taken into consideration. Basic economic concepts provide an important foundation for fundamental pricing strategies. (Hasty, Reardon, 1999:457). Then some certain psychological price concepts should be taken into consideration. At last , the decision maker should understand the mechanics of making pricing calculations. 1. Supply demand curve:
One of the usual approaches in pricing in to mark up cost. (Garison & Noreen, 2003:805). Mark up of a product is the difference between its selling price and cost. The approach to express mark up cost is called cost-plus pricing:
Selling
Manac plc, is a big company which produces and sells a range of standard electrical goods. It is a multinational company whose production and sales take place across a number of countries. Current the company is using the standard costing and absorption costing as part of its approach to strategic management accounting.
But now it is worried about that the company is not meeting its budgeted target profits. The reason for the lower than expected profits may be very complex and the report is produced to explain the flowing: i. The models and concepts affecting the pricing decision and their usefulness ii. The role of variance analysis in management accounting and its limitation. iii. The advantages and disadvantages of introducing an Activity Based Costing system to replace the current Absorption Costing system. Pricing decision
Pricing decision is crucial and tricky: if the prices of our goods are set too high, customers will not buy our product and will choose the products of other companies instead. But if the prices are set too low, our cost will not be covered and thus we will be losing money. The problem the company has now may be attributed to pricing decision, so firstly I will introduce two decision making models along with a wide range of concepts concerning pricing decisions.
When making pricing decisions, many factors have to be taken into consideration. Basic economic concepts provide an important foundation for fundamental pricing strategies. (Hasty, Reardon, 1999:457). Then some certain psychological price concepts should be taken into consideration. At last , the decision maker should understand the mechanics of making pricing calculations. 1. Supply demand curve:
One of the usual approaches in pricing in to mark up cost. (Garison & Noreen, 2003:805). Mark up of a product is the difference between its selling price and cost. The approach to express mark up cost is called cost-plus pricing:
Selling