Evaluation Of Short Term Pricing Decisions - 971 Words

When an organization makes long-term planning decisions, they will typically plan for increases in sales or increases in market share. This means that production volume and capacity would be directly affected by these sales or market share increases. Since fixed costs will only remain fixed for a relatively short period of time, an organization may consider using differential fixed costs in an attempt to account for these expected changes in fixed costs. 2. How is the evaluation of short-term pricing decisions different from the evaluation of long-term decisions? Short-term pricing decisions differ from long-term pricing decisions because short run decisions are typically for smaller, special order production runs that last six months or less. Because these runs will not exceed six months, both fixed and variable costs can be accurately predicted and it is unlikely that there would be significant changes in fixed or variable costs. Because these decisions are smaller in scope they are not likely to affect the overall survival of the company and the company is usually able to weather the storm if these small special order runs are unsuccessful. Long-run pricing decisions on the other hand are much more complex and must be accurate if the company is to survive. Long run pricing decisions 3. Should facility-sustaining costs be considered in making a short-term pricing decision? Facility sustaining costs must not be considered when making short-term pricing decisions. This isShow MoreRelatedBirch Paper1553 Words   |  7 PagesTimberland Each division is operating independently with its own division manager. Also, each division’s performance had been judged on its profit and return on investment (ROI). The company policy of decentralizing responsibility and authority for all decisions except those relating to overall company policy, has been operated with the divisions. 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