As the marketing and sales manager,you are in charge of setting the selling prices of prize-winning music boxes with changeable songs.After you explained two cost-plus approaches to price setting,the CEO chose the straightforward approach of full-cost pricing.The next day,you received an unexpected order for 10,000 units from a Swiss contact with a tight deadline.
Required:
What information do you need immediately to arrive at a selling price that you can justify to the CEO?

Question

As the marketing and sales manager,you are in charge of setting the selling prices of prize-winning music boxes with changeable songs.After you explained two cost-plus approaches to price setting,the CEO chose the straightforward approach of full-cost pricing.The next day,you received an unexpected order for 10,000 units from a Swiss contact with a tight deadline. ​
Required:
​What information do you need immediately to arrive at a selling price that you can justify to the CEO?

Quizplus · Accepted Answer

The CEO has chosen the full-cost pricing approach, which means that the selling price should cover direct cost per unit, overhead expenses, and profit margin. Therefore, the immediate information needed is overhead expenses, profit margin, and direct cost per music box to arrive at a selling price that can be justified to the CEO. Option A is incomplete as it only provides information on the value of resources used in production. Option C is broader as it includes fixed and variable costs, but does not include profit margin. Option D is irrelevant to determining selling price based on the cost-plus approach. Option E is also irrelevant as it pertains to loss-leader pricing which is not relevant in this scenario.

As the Marketing and Sales Manager,you Are in Charge of Setting