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DECISION MAKING MODEL (Short-term decision making (6. Pricing (Selling…

- - - - 1. Demand pull pricing:
        -> uses of target costing. Aim:
        + Target market share + Maximize target profit via: MR = MC -> Selling price at the resulting sales volume. Total profit (TP) at maximum level -> Selling price at the resulting sales volume.
      - 2. Normal/Cost push pricing = cost +profit
      - Minimum pricing, relevant cost pricing, marginal cost pricing, opportunity cost pricing = relevant cost + 0
    - - These can be determined based on:
        
        Standard/Actual cost basis or Cost plus basis.
        
        Market price/Adjusted market price basis
        
        Negotiable price basis.
      - Determination of optimal TP (OTP)
      - Derivation of payoff with uncertain infor in decision making
        
        When probability of each possible outcome is GIVEN:
        
        Expected value (EV) = prob. X value
        -> EV incorporated in NPV
        
        When prob. of each possible outcome is NOT GIVEN:
        
        Sensitivity analysis
        
        Decision rules (based on risk attitude): Maximax, Maximin, Minimax regret.
        
        Certainty equivalent approach