2024 – respond to other student responce in 150 words at bottom utor response In a strategy meeting the computer manufacturing company s

respond to other student responce in 150 words at bottom

 utor response

In a strategy meeting, the computer manufacturing company’s president said, “If we raised the price of our product, the company’s break-even point will be lower.” The financial vice president responded by saying, “The company will also be less likely to incur a loss.” As a management accountant would you agree or disagree with these statements and why? 

I would agree with the company’s president that “If we raised the price of our product, the company’s break-even point will be lower.” The president is correct as a price increase results in a higher unit contribution margin. An increase in the unit contribution margin causes the break-even point to decline. The contribution margin will increase if there is a reduction in variable costs and expenses per unit(Markytán et al., 2018). The contribution margin will also increase if the company is able to increase its selling prices. Of course, the company must be careful that the increased selling price does not cause fewer unit sales. However, I do not agree with the financial vice president saying, “The company will also be less likely to incur a loss.” I can consider the financial vice president’s reasoning as flawed. Even though the break-even point will be lower, the price increase will not necessarily reduce the likelihood of a loss. Customers will probably be less likely to buy the product at a higher price. Thus, the firm may be less likely to meet the lower break-even point (at a high price) than the higher break-even point (at a low price) (Markytán et al., 2018).

Reference

Markytán, P., Mimra, M., & Kavka, M. (2018). Evaluation of break-even point and gross margin economic risks in producing winter oilseed rape

other student response 

 you made some valid points, and I can appreciate you backed your finding with research.  But for myself I see the points of both the president and the VP of finance increasing the prices.  The downside is increasing the pricing is still at a risk of lowing the number of over all sells.