Lee High, the newly hired cost accountant at Blackheath Manufacturing Company, computes the variable cost and the fixed cost per unit on a weekly volume of 500 units of the Great Heath. He uses this information to develop some pricing guidelines. His boss, Charlton Blackheath, endorses the guidelines and adds a feature: a higher commission on sales at a higher price. While both High and Blackheath are away, the file clerk, Adelaide Ladywell, accepts an order below the guidelines and is fired. Students are asked to develop an appropriate set of decision rules for pricing Great Heath and to evaluate Ladywell’s decision. See also “Blackheath Manufacturing Company?Revisited” (UVA-C-2198).
Darden Business Publishing – University of Virginia