(Drury) Pricing Decisions and Profitability Analysis - A price-taking firm facing long-run product mix decisions
3 important questions on (Drury) Pricing Decisions and Profitability Analysis - A price-taking firm facing long-run product mix decisions
What is characteristic for the long run?
In the long term a firm can adjust the supply of resources that are committed to it. Therefore the sales revenue from a product should exceed the cost of all the resources that are committed to it.
What is direct costing?
A costing system that assigns only variable manufacturing costs, not fixed manufacturing costs, to products and includes them in the inventory valuation.
What is absorption costing?
A costing system that allocates all manufacturing costs, including fixed manufacturing costs, to products and values unsold stocks at their total cost of manufacturing.
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