Accounting ch. 5

Net Pay

Amount of income left after taxes and deductions have been taken out.

Gross Pay

Amount of salary or wages earned for a certain period of time before deductions.

JIT

Believe that companies shouldn't hold inventory due to the costs incurred to maintain inventory and because inventory hides problems. IT IS A PULL SYSTEM!

Life-Cycle Pricing

Company attempts to establish a selling price based on costs that will earn it a return over the life of the product.

Target Pricing

Company first determines selling price of the product based on market survey

Skimming Pricing

Company sets the selling price high for its product. (used due to the products uniqueness; EX: fashion clothes that are high in price)

Penetration Pricing

Company sets the selling price low in order to gain a share of the total market for its goods and services.

Selling Price (equation)

Cost + (Cost x Markup)

Commission Pay

Employee's pay is based on a percentage of sales that the employee makes

Price Gouging

Pricing products unreasonably high when the need is great or when consumers do not have other choices (used in order to receive short-term excessive profits).

Markup

A dollar amount added to the cost of products to get the selling price.

Bonus

A fringe benefit that is subject to the occurrence of some future event.

Oligopoly

A type of environment, that exists when a few firms control the types of products and services and their distribution; a degree of competition in which just a few sellers dominate the market. (EX: smart phone companies, pharmaceuticals, health insurance etc.)

Pure Competition

A type of environment, where a large number of sellers produce and distribute virtually identical products and services. (EX: agricultural products: corn, wheat, soybeans etc.)

Monopolistic Competition

A type of environment, where many companies produce similar , but not identical, products; and where the market has a large impact on, but no control over, prices. (EX: restaurant businesses, hotels, bars etc.)

Monopoly

A type of environment, where the government imposes legal constraints on companies that have a select control over a product, service, or geographic market. (the only business/company that sells that product or service; EX: WPS in Wisconsin)

Piece-Rate Pay

Employee's pay is based on the number of units that the employee produces

Salary Pay

Employee's pay is the same each pay period regardless of hours worked.

Price Fixing

Occurs when a group of companies agree to charge one (usually high) price for the same good or service. THIS IS ILLEGAL IN THE U.S.

Selling Margin Percent (selling price - cost)

Selling Margin/Selling Price

Predatory Pricing

Selling a product below cost in order to drive out the competition, control the market, and then raise the price. ILLEGAL

Hourly Pay

The employee is paid a certain amount per hour.

Dumping

When a company sells its products below cost in foreign countries.