From the course: Accounting Foundations: Cost-Based Pricing Strategies
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Long-term, normal pricing: The case of the projectors
From the course: Accounting Foundations: Cost-Based Pricing Strategies
Long-term, normal pricing: The case of the projectors
- We have looked at the impact of cost on pricing in a couple of special order examples. Now let's think about setting long term normal prices. Mister Julian Company manufactures projectors that are mounted in school classrooms. Mister Julian is currently negotiating to become the regular supplier of projectors for the classrooms in the city of Surfer's Paradise in Australia. Mister Julian has been asked to make a bid for the price at which it will sell projectors over the next 10 year period. Mister Julian's company's cost data are as follows. Fixed manufacturing overhead total $300,000 per year. Fixed selling and administrative expenses are $100,000 per year. Mister Julian's average number of projectors sold per year is 1,000, and to finance the purchase of its assets, Mister Julian has received a million dollars in long term financing that's a combination of owner investment and long term loans. Now, assume that the cost…
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