Pricing Costing b2b

7/30/2019 Pricing Costing b2b

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Helps in determining selling price Determining and controlling efficiency

For preparations of financial and otherstatements

Basis for operating policy

Shutting down or operating at loss??

Cost volume profit relationship

Make or buy decision


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Material

Direct/indirect

Labor Direct/indirect

Expenses

Direct/indirect

Overheads

Factory/administrative/selling and distribution


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Absorption costing Marginal costing

Standard costing Differential costing Uniform costing


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Focus is more on how to allocatemanufacturing costs to the product

Dividing variable costs and fixed costs Variable costing to the product and the fixed

cost of production are treated as periodexpenses


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Variable costs are charged to the cost units andthe fixed costs or the period are written-off in

full against the aggregate contribution (sales

variable cost).e.g. If a factory produces 1000 units at a total cost of $3,000

and if by increasing the output by one unit the cost goes up

to $3,002, the marginal cost of additional output will be $.2.


7/19

The standard cost is a predetermined costwhich determines in advance what each

product or service should cost under givencircumstances.

Primarily used to:

Measurement of efficiency

Variance in efficiency (actual vs standard)

Cost control

Right decisions


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Cost that varies with every alternative. This isuseful in decision making where alternative

has different cost and revenues.e.g. make or buy decision


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When several undertaking start using thesame costing practices, they said to be

following uniform costing. Basic idea is to follow a similar costing

method in the industry for better comparisonand common good.


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Specific order costing Job costing

batch costing Contract costing

Operation costing Unit costing

Process costing Operating costing/service costing Composite or multiple costing


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Applicable to those industries where theactivity being accomplished consists of a taskwhich is specifically identifiable at each stageof production

e.g. customized products


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Applicable to those industries where theactivity consists of continuous or repetitive

operations or processes and the products areidentical and cannot be segregated. E.g. shirt making factory quality check is

repetitive in nature


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14/19

An accounting system used to apply costs:To similar productsThat are mass-produced

In a continuous fashion


15/19

Cost are assigned to each job; used

where finished products can be

individually identified


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18/19

A shrinking customer base and consolidationof power

More distributor channels chasing fewermargins Distributor consolidation Technological sea change


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Thank you

Pricing Costing b2b

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