Pricing of goods and services
Pricing of goods and services is a vital part of the profit – deciding on an organization. It is because the cost of producing a unit of a commodity is deducted from the price of the commodity to earn a profit. In most organizations, the selling price is arrived at after estimating the total unit cost of producing a unit of a product. It is a markup of the total cost of producing the product.
Thus, the prices of goods should be above the average per unit cost of producing the goods. Otherwise, the company will incur losses. From the analysis above, it is true that a manager who charges prices that are below the cost per unit of the commodity needs further training on pricing decisions to help mitigate losses which a company is likely to make from wrong decision making (Collier 196).
Pricing of e-books by Amazon.com and Apple Corporation
The fixed costs consist of expenses that are incurred in lump sum irrespective of the number of units of goods and services produced. Examples of fixed costs are the purchase of land, equipment, and machinery among others. It is often difficult to allocate the amount spend on fixed costs on the number of units of goods and services.
The low marginal costs of producing a unit of e-book can be attributed to the fact that the extra cost of producing an extra unit of the book is not dependent on the fixed cost.
In the event that marginal pricing technique is used to determine the prices of the goods and services, the prices of goods and services will not be affected by the high fixed cost because the profit-maximizing level of output and prices is attained at the point where marginal cost equals the marginal revenue of the product. This is often demonstrated using the short-run marginal cost and marginal revenue curves.
Thus, the high fixed costs will not affect the pricing decision of the firm. The prices will be low when marginal costing is used to calculate prices. Besides, it is consistent with the concept of profit maximization.
After ascertaining the selling price of goods and services, the management of the company should go ahead and estimate the break-even number of units that needs to be produced and sold. Break-even analysis will make use of the fixed cost, selling prices and variable cost per unit in determining the price per unit (Haber 89).
Uninsured and insured patients
The difference between uninsured and insured patients is that the medical bills of the insured patients are paid up front. Thereafter, the individual can enjoy the services free of cost. An uninsured patient pays the medical expenses upon receiving medical treatment. The insured patient often receives discounts when paying upfront. Besides, they are in a pool and thus some medical expenses are paid for as a group.
The individual bears a small proportion of the burden as compared to when they are not insured. Also, the government subsidizes the medical costs when individuals are insured than when they pay for the medical costs individually because the administrative cost of administering subsidies to a group is lower than the cost to an individual.
Thus, there are lower costs of medical bills due to economies of scale that arises when dealing with a group of people than when dealing with an individual (Collier 74).
Works Cited
Collier, Paul. Accounting for Managers, London: John Wiley & Sons Ltd, 2009. Print.
Haber, Jeffrey. Accounting Demystified, New York: American Management Association, 2004. Print.