Introduction to pricing decision

A pricing decision is one of the most crucial and difficult decision that a firm has to make. It is one of the most difficult decisions. Such a decision affects the long term life of any profit oriented enterprise.

Accounting information is often an important input to pricing decisions. Most firms needs to make decision about setting or accepting selling prices for their products or services. In some firms selling prices are serviced directly from cost information by estimating future products cost and adding a suitable profit margin. In others an recognized market price is accepted. Fundamentally, in pricing decision the management must first decide on its pricing goal and then set the base price for goods or services. After this the firm may design its pricing strategies.

Pricing decision is handled in a variety of ways in different companies. In small companies, price decision is take by the top management. In some larger comparer it may be in the hands of divisional and product line managers but here also top management sets the general pricing policy and objective.