CHAPTER 11

Changing Prices

Costs are not the only item that can change, making the work of a manager challenging. Companies can go along quite comfortably for weeks or months on track to achieve their annual profit goals. Sometimes without warning, competitors take an action or customers begin to change their tastes, requiring managers to consider changing selling price.

The application of breakeven analysis reviewed here seeks to answer this simple question: How would a selling price change affect sales goals and still generate equal or better profit?

This application of breakeven analysis takes as a given that the current level of profit is acceptable to managers. The application is built on the ratio of the change in selling price to contribution ...

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