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Marginal cost or incremental cost pricing method:
Here the company may work on the premise of recovering its marginal cost and getting a contribution towards its overheads. This method works well in a market already dominated by giant firms or characterized by intense competition and the objective of the firm is to get a foothold in the market.
In the example of shirts given above the variable cost is Rs 30 per shirt. As long as the firm is able to recover this cost and get a contribution towards its overheads, it is an acceptable pricing method. This will also work when the firm has an inventory of finished goods and it wants to liquidate it. At that time the prime concern is to recover the direct costs. The problem with this method is that it often sparks price wars which is not beneficial to any firm in the industry.
Consortium Lending: As the financial needs of a single unit are more than a single bank can cater to, then more than one bank comes together to finance the unit jointly spreading
Feedback Control System Feedback is information about actual achievements or actual results produced within the organization (e.g. management control reports) with the purpose
RELEVANT COSTS FOR NON-ROUTINE DECISIONS A relevant cost is a cost that is appropriate to a specific management decision. To be relevant, a cost should be: 1) Future cost
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Problem Marginal costing plays a major role in making certain decisions. It provides information to management regarding the behaviour of costs and the incidence of such costs
Budgets An essential planning component is budgeting. Budgets sketch the financial plans for an organization. There are number of budget types. Operating Budgets -- A plan
Characteristics of irrelevant costs
A local government authority owns and operates a leisure centre with numerous sporting facilities, residential accommodation, a cafeteria and a sports shop. The summer season lasts
Operating Cycle Method In this way, total operating expenses for a period are divided via the number of operating cycles in the relevant period to compute the cash need for wor
What is Programmer budgeting It is a combination of programming and systems refers to the activity and system analysis refers to cost benefit analysis or operations research. I
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