Newcastle Division
Topic: CVP, Probabilities and Tar view pay
A meeting of superior managers at the Newcastle Division has been c altogethered to discuss the pricing scheme for a new growth. Part of the discussion will focus on the problem of forecasting sales volume. In the last form a significant number of new products have failed to carry out their forecast sales volumes. The financial accountant has already state that the profit for the year-end will be lower than reckon and the main reason for this is the disappointing sales of new products.
A new technique for estimating the probability of achieving target sales and profits will be discussed. This requires managers to estimate demand for the new product and assign probabilities. The management accountant is in favour of this arise as she wants to avoid having a single estimate for sales.
details of pricing stategies
The first strategy is to set a selling worth of £170 with annual fixed be at £22,000,000. A number of managers are in favour of this strategy as they believe it is important to reduce costs.
The second strategy is too have a much higher expending on advertising and promotions and set a selling price of £190. With the higher selling price the annual fixed costs would increase to £27,000,000. The marketing department are very exposed that greater expenditure on advertising and promotions is essential for this product.
The following(a) probability distribution has been agreed with the managers after consultation and is the analogous for both selling prices. A wide range of managers from all departments have agreed to this estimate.
|Estimated demand (units) |Estimated probability (units) |
|150,000 |0.1 |
|160,000 |0.4 |
|180,000 |0.3...If you want to get a full essay, order it on our website: Orderessay
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