To Maximize profit, you need to sell output at the highest price." This is a great idea in theory. However, with an economy that is gradually moving towards a recession, profit margins will increase with competitive pricing. It is a good idea to introduce products at higher prices to gain sales of individuals with more money to spend…
In addition, companies are wise to consider what their competitors are selling the same product for. If a product is worth $50 and the competitor is selling the product for $49, then matching that $49 is essential unless there is a marketing strategy that promotes the product as being better than what the competitor is offering. Raising prices to a ridiculously high amount is not going to increase profits when many customers are going to ba able to find the same product somewhere else for less money. High prices must be justifiable for a market for the expensive product to develop.
One must also consider that consumers seeking a bargain will wait for price cutting to occur. Thrifty consumers are willing to wait until newer models are released so that the prices of the old model are slashed significantly. These are all factors that must be anticipated by the company when establishing what type of profit needs to be expected from the product and in what type of time frame. So, in a linear sense, as time progresses, it is wise for a company to sell output at the highest possible rate that can be justified by the current market. This is noticeable in the cell phone industry. With most cell phone companies, when one signs a contract, a free or reduced price cell phone is given to the customer at time of contract. In many cases though, money can be made on the contract signing with the sale of an upgraded phone. Most individuals with any extra money to spare are going to be lured in by the newest and most muti functional phone. This When these higher tech phones are released onto the market, they are typically very expensive. It is later when they are replaced in the commercials by a newer model that they are sold at more reasonable and reduced prices from their original release price. Customers will often find reduced price, used phones on e-bay.
"Elasticity of demand deals with the extent to which costs increase as demand increases." Certainly the video game industry is proof of this statement. When new gaming systems are released onto the market, advertisements explode all over television. Everyone marks the new system on their wish lists and the holiday seasons make it almost impossible to find and purchase whatever is the newest in gaming technology. The video game system companies are clever about advertisement and product testing. They make sure that anyone who has ever enjoyed playing video games in their life, feels the need for the latest system. As this demand increases, shortages follow. This sense of wanting something that you can't have right away causes an even stronger desire for the product and the several hundred dollars charged per system is justifiable. The prices of gaming systems are quite hefty when they are first released. The gaming companies make a huge margin of profit initially and once the prices of the systems are lowered such that almost anyone can afford one, the company has already made more than anticipated profits.
"Provided that price is large enough to cover marginal cost of production, sales should be made." The bottom line in any business is to turn a profit. It is important though at difficult economic times to break even. This means that selling a product for the price that it costs to produce. If a product costs a company $10 to produce, and the product is ...
Cite this document
(“Critical Accounting Assignment Essay Example | Topics and Well Written Essays - 2500 words”, n.d.)
Retrieved from https://studentshare.net/business/290300-critical-accounting-assignment
(Critical Accounting Assignment Essay Example | Topics and Well Written Essays - 2500 Words)
“Critical Accounting Assignment Essay Example | Topics and Well Written Essays - 2500 Words”, n.d. https://studentshare.net/business/290300-critical-accounting-assignment.
Generally, income is recognized as revenue when a company delivers its product or rendered service and receives payment for it. Under accounting principle of ‘revenue recognition’, revenue is recognized only under specific circumstances. According to International Accounting Standard 18: Income is defined as increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
According to the regulation, the definition of cost includes all costs of purchase, costs of conversion and all other costs incurred by any firm in bringing the inventories to their personal location and condition. Inventories shall be measured at the lower of cost and net realizable value.
Management Accounting is also useful for preparing the accounts for the non management group such as shareholders, tax authorities and regulatory agencies. This also includes of preparing the Formulation of plans and budgets which will be converted into financial accounts.
businessdictionary.com) and “A combination of authoritative standards set by policy boards and simply the commonly accepted ways of recording and reporting accounting information”(www.investopedia.com).
Accountants use GAAP to “guide them in recording and reporting
The balance sheet indicates the financial position of an organization during a period of specific financial year usually one year. The way to show the success of a company is a balance sheet. A balance
The company became a publicly traded company through an IPO at $22.50 a share in 1965 (Aboutmcdonalds). Today McDonald’s is the market leader in the fast food industry. The U.S. fast food industry is valued at $65 billion annually.
The revenues of the
The analysis using appropriate ratios will be undertaken in the light of the general and economic and industry specific contexts. The companys ratios will be compared to its competitors in industry using averages available to enhance analysis. There is need to
These digital applications and contents are delivered and sold through Mac App Store, iTunes Store, iBooks Store and the App Store. Apple’s products and services include Apple TV, iPhone, iCloud, iPad, iPod,
re, the modern business organisations tend to employ potential accountants with the aim of coping up with such complexities towards the accomplishment of predetermined business targets (Boyce & et. al., 2001). It will be vital to mention that in order to serve the above
7 Pages(1750 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic Critical Accounting Assignment for FREE!