Profit maximizing cost allocation for firms using cost-based pricing

Article Abstract:

A profit maximizing cost allocation method is developed for companies that allocate all costs to their different outputs and then base prices on these costs. This pricing strategy is known as the fully-distributed cost-based pricing or the cost-plus approach. A study is conducted that focuses on the allocation of fixed, shared and untraceable costs to a cluster of outputs or products whose prices are determined by multiplying the cost of the product by a number greater than one. It examines an allocation plan that seeks to maximize the company's profits under conditions when demand is dependent of the price of the product, when this price is dependent on the product's cost and when the product cost is dependent on all the costs allocated to it. The results of the study are discussed.

Pricing, Cost accounting, Allocation (Accounting)

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Conditional monitoring policy under moral hazard

Article Abstract:

A conditional monitoring policy with monitoring investment level selectivity features for the principal is investigated. The proposed conditional monitoring policy is tested for qualities distinct to interior optimal monitoring policies. The proposed model of conditional monitoring is differentiated from previous models by the endogenous determination of the monitoring system's precision through the principal's monitoring investment choices and by the model's applicability to both linear and concave monitoring systems. The proposed model displayed a functionality that extended beyond nonrandomized investigation policies' characteristic bang-bang outcome.

Methods, Analysis of variance, Agency theory

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