Pricing and Costing (Junar)

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COSTING AND

PRICING

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COSTING

 A. PRODUCT COSTING

Specification and calculationof costs in producing or 

doing the thing.

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COSTING

 A.1 Why Product Costing

- the most precise way todetermine the price of an

article.

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COSTING

- enables the company to

determine what or whatcombination of products are

most profitable.

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COSTING

- used to determine how much

of the indirect costs of acompany each product

should absorb.

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COSTING

- simplifies updating of prices

when conditions change.- sets price frames.

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COSTING

 A.2 Elements of Cost

 A.2.1 Direct Materials A.2.2 Direct Labor 

 A.2.3 Overhead

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COSTING

 A.2.1 Direct Materials

Cost of materials enteringinto and becoming part of 

a product.

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COSTING

 A.2.2 Direct Labor 

Cost of remuneration for laborers or employer¶s

efforts and skills applied

directly to a product or service.

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COSTING

Overhead can be further subdivided into:

- indirect materialsNot actually incorporated in

the finished products but

essential to its manufacture.(e.g. grease &oil, gloves)

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COSTING

- indirect labor 

wages of worker notengaged in the actual work

of production. (e.g. wages

of foreman, cleaners, etc)

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COSTING

- Manufacturing overhead

(electricity, gas, maintenancesupplies)

- sales & Admin. overhead (fax

& telephone, postage, salesexpenses, travel managerial

and clerical salaries, etc.

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COSTING

 A.3.1 Fixed costs (relatively

unaffected by increases or 

decreases in production volume)

 A.3.2 Variable costs (vary directly

with changes in production volume)

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PRICING

B. Product Pricing

Price±

is the value of aproduct or service expressed in

money.

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PRICING

In business, the apparent

objective of pricing is to maximize

profit. Pricing is planned to meet stiff 

competition, to improve market

share, and to get a fair return of investment.

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PRICING

1. be aware of possible

choices and options.

2. analyze the factors

involved and

3. have a clear 

understanding of the

objectives to be achieved

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PRICING

B.2 Price Factors

- Cost of Product

- Demand- Competition

- Channel of Distribution

- Company Objectives* Penetrate market, increase market share,

project product prestige, maximize profitability,return on investment and minimize losses.

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PRICING

-Factors outside our immediate control

* Exceptional exchange

rate fluctuation, price

control, energy and fuelcrisis, etc.

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PRICING

B.3 Price Structure

- Gives a detailed picture of all cost elements from the

factory to the customer.

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PRICING

- Enables the manufacturer to:

* Build up his final price stage by

stage.* Compare his pricing at all stages

with that of his competitors.

* Analyze his prices to find out

whether cost savings can or shouldbe achieved in one or more

elements.

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PRICING

GENERAL APPROACHES &

STRATEGIES IN PRICING Cost-Plus-Method

Base on the Prevailing Market Price

Below the Prevailing Market Price

Psychological Pricing

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PRICING

GENERAL APPROACHES &

STRATEGIES IN PRICING

Prestige Pricing Penetration Pricing

Price Skimming

Value-based Pricing

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COSTING AND PRICING

THANK YOU!