Posted by & filed under All Articles, Cost Accounting, Managerial Accounting.

In an effort to keep their heads above water in recessionary times, many companies ignored their traditional strategic plans. They grabbed at any transactions that were above variable costs in efforts to cover fixed costs. Moving away from value-based pricing, they relied on cost-plus pricing. Unfortunately, as this article mentions, cost-cutting can only go so far and then pricing strategies must be overhauled.

QUESTIONS:

  1. According to the article, what are five signs that a pricing strategy needs to be changed?
  2. According to the article, why isn’t profit margin necessarily the best metric when measuring the success of strategic pricing initiatives?
  3. According to the article, why does cost-plus pricing have little to do with market reality?

SOURCE:
Ryan, V. (2009). “Price Fixing,” CFO (Retrievable online at: http://www.cfo.com/article.cfm/14456855/c_14457851?f=insidecfo)

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