Appendix J

PRICING

CHAPTER LEARNING OBJECTIVES

After studying this chapter, you should be able to:

 1. Compute a target cost when the market determines a product price.

 2. Compute a target selling price using cost-plus pricing.

 3. Use time and material pricing to determine the cost of services provided.

 4. Determine a transfer price using the negotiated, cost-based, and market-based approaches.

 5. Explain the issues involved in transferring goods between divisions in different countries.

 5. Explain the issues involved in transferring goods between divisions in different countries.

*6. Determine prices using absorption cost pricing and variable-cost pricing.

*Note: All asterisked (*) items relate to material contained in the Appendix to the chapter.

PREVIEW OF APPENDIX J

Few management decisions are more important than setting prices. In this chapter, two types of pricing situations are examined. The first part of the chapter addresses pricing for goods sold to external parties. The second part of the chapter addresses pricing decisions faced when goods are sold to other divisions within the same company. The content and organization of this chapter are as follows:

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CHAPTER REVIEW

Pricing Goods for External Sales

  1. (L.O. 1) Some of the many factors that can affect pricing decisions include:
    1. Pricing Objectives
      • Gain market share
      • Achieve a target rate of return
    2. Environment

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