Profit Planning and Decision

Each Business should monitor the effect of its pricing strategy on the business ’s gross margin. Gross margin is the difference between the selling prices of a product or service and the amount the business had to pay for the raw materials that make up that product or service. A price reduction usually results in a reduction in gross margin. Increased sales volume can lead to a reduction in the average cost of goods sold because suppliers will often provide discounts to clients that buy in large volumes. A price increase that increases sales volume—or, at least, does not reduce sales volume—is a powerful tool for profit. Businesses that are able to raise prices without cost increases and without sacrificing sales volume possess are called pricing power.


Introduction to Management Accounting	Cost Volume Profit Analysis	Relevant cost and benefits	Cost Analysis and Pricing Decision
Profit Planning and Decision	Definition of Managerial Accounting

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