Module+14000+X+Summary+and+Conclusions

=X. Module 14000 Summary and Conclusions CQ =

**I.** Companies use different strategies to set price. Because cost is an important determinant of supply in respect to the producer, many companies base price on cost. Still other companies use a target-costing strategy, or strategies based on the initial conditions in the market.

**II.** The basic economic mutual influence between demand and supply helps to set price.

Producers/suppliers are able to sell more at a high price than a low price. Customers buy less at a high price than they do at a low price. Equilibrium price is reached where quantity demanded equals quantity supplied. Price elasticity of demand is the percent change in quantity demanded for a given percent change in price.

**III.** Profit is measured to assess performance. Absorption-costing income measurement is required for external financial reporting. All manufacturing costs are attached to units of product including: Product costs for the period are assigned to units sold or units put into inventory.
 * Direct materials
 * Direct labor
 * Variable factory overhead
 * A portion of fixed factory overhead

**IV.** Variable costing is useful for management decision making. All variable manufacturing costs are attached to units of product including: All fixed costs(including fixed factory overhead and fixed selling and administrative expense) are treated as period expenses on the income statement. Variable costing and ABC give better signals regarding performance and incremental costs.
 * Direct materials
 * Direct labor
 * Variable overhead


 * V.** Limitations of profit include:
 * Uncertain economic conditions
 * Difficulty of capturing all important factors in financial measures
 * Focus on past performance