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at the pricing section, Ive come across the question whis is True/False one.
So the statement was: “Full cost pricing guarantees the profit”. When it was answered as False, contradicting with the statement you gave to us in the lecture on pricing.
At the back it gave an explanation as : This approach doesnt guarantee Profit for the company because you should ensure Demand for your product at the stated price. If the costing is too high Demand will not be enough to cover Fixed costs.
Please advise on it sir.
If you listen to my pricing lectures in full then you will see that I certainly do not say that full cost pricing guarantees a profit at all !!! They are only guaranteed a profit provided that the actual production is at least as high as the budgeted production.
If the actual production is less than the budgeted production (because the demand is lower than budgeted) then the fixed overheads per unit will be higher and the full cost will therefore be higher. In that case the product could end up being loss-making.
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