Question

Question2: Evaluate the financial and non-financial (qualitative) issues that may arise when an organization is considering the following decision making situations:

1. Special selling price decisions (involving one-time only orders)

2. Product mix decisions when capacity constraints exist (limiting factors)

Answer 1

a) special selling price decisions are made for products which are specially ordered by the customers once. It takes a great deal to analyse how to lay the costs on these items to make profit for them.

There are financial and non financial issue with it. They are :

• It is always challenging to meet the demand of the customers because as the order is special, customers have their specific expectations from this.
• The sellers have to set the price which would cover his costs as well as still attract the customers.
• The sellers should make sure that they are having all the essential manpower and other resources to complete that special or not as these are very important regarding perfect completion of the order.
• One most important financial issue is to cover their variable and fixed costs which were employed by the company.

a) Product mix decisions are decisions taken by the company to mix two or more products for production or sale.

The financial and non financial issues with it are :

• The most important issue is that will the sales mix or product mix which is more profitable.
• All the items to be mixed should be able to give a perfect contribution margin to have profit in the production or sale.
• Items should be priced such that customers have no issues in paying the prices set.

This, these are the financial and non financial issues with the special selling and product mix mentioned above.