BLG Corporation produces and sells yachts for wealthy customers. BLG's accountants produced the data shown below as a basis for client negotiations for the coming year: Big Winner Sport Star CEO
Basic yacht $ 600 $ 600 $ 600
Customization costs 300 500 200
Marketing costs 100 400 300
Total costs $1,000 $1,500 $1,100
Assume that all the preceding costs are avoidable. The company will incur an additional $800 in unavoidable costs during the coming year. BLG's managers want to achieve a profit margin of 80% based on total costs.
BLG's system is best described as:

Question

Quizplus · Accepted Answer

BLG Corporation is using cost-based pricing as they are basing their pricing strategy on the total costs incurred in the production and selling of their yachts. They are adding a profit margin of 80% on top of their total costs, which suggests that they are not considering external market factors or product life cycle costs. Additionally, the company's pricing strategy does not appear to involve continuous improvement efforts (kaizen costing).

BLG Corporation Produces and Sells Yachts for Wealthy Customers