Accounting Foundations: Cost-Based Pricing Strategies

Course details

Accurate pricing protects your profits and keeps your products competitive. In this course, instructors Jim and Kay Stice explore cost-based pricing strategies that account for the costs associated with creating products, from materials to man hours, as well as overhead and R&D. Discover how the cost-plus model used in government contracts can provide a baseline for your business, and explore alternatives such as loss leaders and bundling. Then learn how to account for the production constraints for special orders and use forecasting to determine stable long-term prices. Finally, learn how transfer pricing can affect internal performance metrics and international income tax planning, and how activity-based costing allows companies to charge more for products or customers with greater demands.

Topics include:
- Identify the various categories of product cost.
- Describe the method of allocating overhead costs.
- Relate the way in which business managers make break-even decisions.
- Define the transfer price of a product or service.
- Explain how to determine segment margin for a business.
- Explain activity-based costing.

Concepts

0. Introduction

01 - Protecting profits with accurate pricing

1. Cost-Based Pricing vs. Supply and Demand

02 - The Stice custom-made oak table
03 - Use of costs in pricing customized products
04 - Cost-plus contracts - Examples of government contracts
05 - Cost-plus pricing case - Dugway Printing

2. Difficulty in Defining Cost

06 - Description of Export Clothing Company
07 - What is the cost to make one shirt
08 - Is $3.20 per shirt a good selling price

3. Pricing Implications of Fixed Costs and Variable Costs

09 - Do stores really sell things at a loss
10 - The clever bundling of the Big Mac meal
11 - Russian restaurant analysis - Breakeven vs. market demand
12 - Pricing in a fixed-cost setting

4. Short-term and Long-Term Pricing

13 - Pricing a special order at the print shop
14 - Evaluating price when there is a production constraint
15 - Long-term, normal pricing - The case of the projectors

5. Transfer Pricing

16 - What is transfer pricing and why is it important
17 - Case study - Introduction to the transfer pricing controversy
18 - Case study - What would the owners prefer
19 - What do the decision-makers prefer
20 - Can transfer pricing solve this conflict

6. Pricing and Overhead Costs

21 - Which airline passengers create overhead costs
22 - Right-handed airplanes and left-handed airplanes
23 - The potential consequences of poor overhead assignment

Conclusion

24 - Pricing, strategy, and KPIs