Lesson Plan 11.3 – Using Cost Data
for Pricing Decisions
Course Title – Accounting II
Lesson Title – Using Cost Data for Pricing Decisions
Specific Objective - Learn how businesses price products based on cost.
Performance Objectives:




Describe various approaches to pricing products and services;
Calculate product price based on four cost-plus pricing methods;
Calculate service and repair price based on time and materials pricing;
Define the accounting terms related to the lesson.
TEKS: 130.167.c.6.C - determine relevant cost and revenue data for decisionmaking purposes.
TAKS: R1, M2, M10
Preparation
Materials Needed:



Projection system and computer for visuals and on-line resources
Glencoe’s Textbook, Chapter 25, and Demonstration Problems
Accounting software and spreadsheet software
Sponge/Focus Activity:
Exploring the Real World of Business, in Glencoe’s Textbook
Lesson Content:
See Glencoe’s Textbook, Chapter 25. Here is an outline:
I.
Cost-Plus pricing
A. Pricing based on cost
1.
Product cost-plus pricing
2.
Full cost-plus pricing
3.
Standard cost-plus pricing
4.
Variable cost-plus pricing
5.
Target pricing
II.
Time and Materials Pricing
A. Calculating the price per job
1.
Labor charges
2.
Materials charges
Lesson Plan 11.3 – Using Cost Data for Pricing Decisions
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING II
3.
Calculating the invoice amount
Teaching Strategies: Glencoe’s Demonstration Problems
Assessment:

For problems you can use Peachtree Accounting from Glencoe, Glencoe
Accounting Software, Century 21 Accounting Software, or a spreadsheet.

From Glencoe’s Textbook
o Guided Practice
 25-1 Using Product Cost-Plus Pricing
 25-2 Using Time and Materials Pricing
o Independent Practice
 25-3 Using Product Cost-Plus Pricing
 25-4 Using Cost-Plus Pricing
 25-5 Using Cost-Plus Pricing
 25-6 Using Full Cost-Plus Pricing
 25-7 Using Cost-Plus Pricing
 25-8 Time and Materials Pricing
o Additional Activities: Using Key Terms, Understanding Accounting
Concepts and Procedures, Case Study, Internet Connection,
Conducting an Audit with Alex, and Workplace Skills
o Open Notes and textbook Quiz: Study Guide for Chapter.
o Takin’ Care of Business Educational Handbook, Lesson 4:
Measuring Productivity “From Air to Market”
This lesson is also assessed through the Unit Test at the end of the Unit.

Additional Resources:
Textbooks:
Guerrieri, Donald J., F. Barry Haber, William B. Hoyt, and Robert E. Turner,
Glencoe Accounting Real-World Applications & Connections, Advanced
Course, Fourth Edition, Glencoe McGraw-Hill: New York, New York.
Takin’ Care of Business, Education Handbook, American Institute of Certified
Public Accountants, 1211 Avenue of the Americas, New York, NY 100368775, www.aicpa.org.
Lesson Plan 11.3 – Using Cost Data for Pricing Decisions
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING II
Activity 11.3.1 – Using Cost Data for Financial Decisions
Course Title – Accounting II
Lesson Title –Using Cost Data for Financial Decisions
Specific Objective –
Students investigate the factors management uses to make pricing decisions,
then uses electronic spreadsheets to create what-if scenarios based on the
information collected.
TEKS: 130.167.c.6.C – determine relevant cost and revenue data for decisionmaking purposes.
TAKS: R1, M2, M10
Preparation
Materials Needed:


Computer with presentation software and Internet access
Computer with display system and presentation software for student’s
presentations
Activity Outline:
1. Listen to a guest speaker from a retail management firm in reference to what
factors determine pricing. After the guest speaker, students should make a list
on their think pad of factors they remember and share them with the class.
See who can remember the most and give them a piece of candy, special
privilege or other reward.
2. Interview at least one person in the retail business that makes pricing
decisions or has training in that area and give a three to five-minute report to
the class on what you learned.
3. Download the spreadsheet files of the financial report for Colgate-Palmolive.
Create three what-if scenarios for pricing decisions.
http://www.colgate.com/app/Colgate/US/Corp/AnnualReports/2010/HomePage.cvsp. Print each scenario.
4. Write a summary about what the management pricing decision would be and
why. (You could use this as a team activity and allow the students to search
the Internet for a product that has the financial report in downloadable format
for them to use.)
Activity 11.3.1 - Using Cost Data for Financial Decisions
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING II
Assessment:
Financial Reporting Rubric
Performance
Element
Exemplary
Acceptable
Facts from guest
speaker. (10pts.)
Student stated five
factslearned from the
guestspeaker.
(10 pts.)
Interview and oral
report. (30pts.)
Student conducted
therequired interview
andpresented a
factual, organized
report. (30 pts.)
What-if scenarios
andsummaries of
management
pricing decisions
with justification.
(60 pts.)
Student prepared the
what-ifscenarios and
wrote asummary with
justification as
to the best pricing
decision.(60 pts.)
Student stated four
factslearned from the
guestspeaker.
(6 pts.)
Student conducted
therequired interview
andpresented a
factual andorganized
report with two
exceptions. (20 pts.)
Student prepared the
what-ifscenarios and
wrote asummary with
twojustifications as to
the bestpricing
decision. (44 pts.)
Activity 11.3.1 - Using Cost Data for Financial Decisions
Unacceptable
Student stated three
or lessfacts learned
from the guest
speaker. (0 pts.)
Student did not
conduct theinterview
or present a report.
(0 pts.)
Student did not
prepareappropriate
summaries and
justification for the
what-ifscenarios.
(0 pts.)
Copyright © Texas Education Agency, 2011. All rights reserved.
ACCOUNTING II