External pricing Flashcards
1
Q
Inelastic demand
A
Inelastic if a change in price has little effect on the number of units sold
2
Q
Elastic demand
A
Elastic if a change in price has a substantial effect on the volume of units sold
3
Q
Cost-plus
A
Used in less competitive markets –> price setter
• Product is more unique
• Less competition
Selling price = Cost + (1 + markup%)
4
Q
Target costing
A
Used in more competitive situations. Substitution possibilities –> price taker
• Product lacks uniqueness
• Intense competition
Target cost = anticipated selling price - desired profit
5
Q
Markup%
A
The mark-up is the difference between the selling price and the cost. The mark-up % is calculated different for variable costing and for absorption costing method.
