question archive 1) Describe the downward demand spiral and its implications for pricing decisions
1) Describe the downward demand spiral and its implications for pricing decisions
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1) Describe the downward demand spiral and its implications for pricing decisions.
2) Will the financial statements of a company always differ when different choices at the start of the accounting period are made regarding the denominator-level capacity concept?
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Answer:
1.
The downward demand spiral is the continuing reduction in demand for a company's product that occurs when the prices of competitors' products are not met; as demand drops further, higher and higher unit costs result in more and more reluctance to meet competitors' prices.
2.
No--it depends on how a company handles the production-volume-variance in the end-of-period financial statements
for example, if the adjusted allocation-rate approach is used, each denominator-level capacity concept will give the same financial statement numbers at year-end.
