pricing costing b2b
Post on 04-Apr-2018
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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.
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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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An accounting system used to apply costs:To similar productsThat are mass-produced
In a continuous fashion
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Cost are assigned to each job; used
where finished products can be
individually identified
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A shrinking customer base and consolidationof power
More distributor channels chasing fewermargins Distributor consolidation Technological sea change
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Thank you
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