Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › 40- Stay Clean (Dec 2009)
- This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
- AuthorPosts
- January 21, 2023 at 5:05 am #677131
Hi Sir.
Dishwasher (DW), Washing machine (WM) and tumble dryer (TD).
Current contributions.
DW = $80, WM= $170 and TD = -$10I understand the the computation part.
Their is (b) question in Kaplan kit asking.b) explain two pricing strategies that could be used to improve the financial position of the business in the next 12 months assuming that the TD continues to be made in that period.
Their answer is
Complementary pricing, stay clean could link their sales with complementary price. For example they could offer customers a discount on the second product bought, so if they buy (say) a TD for $80 then they can get a WM for (say) $320. Overall then stay clean make a positive contribution of $130 (320+ 80 – 180 – 90).Product line pricing.
If I write only conclusion, they said
A package price could be offered and as long as Stay Clean make a contribution on the overall deal then they will be better off.So my question is what is the point of discount when you are already making negative contribution. Before the discount, they were making from the two products $150 (350 + 80 – 180 – 90).
I don’t understand what is the point in here, may be that is because I don’t know how this pricing strategy will hide the lost contribution in one product. So please help me with it.January 22, 2023 at 11:06 am #677208It might be worth losing money on one product if, as a result, they were able to sell more of another product and make enough from the other product so as to cover any loss on this product. (The same idea as the example I give in my free lectures of razors and razor blades 🙂 )
January 22, 2023 at 9:30 pm #677239Thank you very much sir. I also need to watch that very lecture if you can tell me the topic or link. Thanks.
January 23, 2023 at 9:40 am #677251You are welcome.
The lectures are supposed to watched in chapter order, but you can find an index to them all linked from the main Paper PM page: https://opentuition.com/acca/fm/
(You will of course need to download the free lecture notes as well – they are linked from the same page.)
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