Managing Financial Resources

MANAGING FINANCIAL
RESOURCES

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Question 2....................................................................................................................................3
Question 3....................................................................................................................................4
Question 3....................................................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................1

INTRODUCTION
The company that really wants to expand and grow their business to the great extent have to
hire an expertise finance manager. This report will cover the cost-plus price approach and the
problem the company can facing using this approach.
MAIN BODY
Question 2
Cost-Plus Pricing
In this strategy of pricing, the company in order to reach at the selling price of the product
need to add the markup to the cost of goods sold. Under this approach, the company can add all
the direct material, direct labour and overheads cost together and after that they can ass the
suitable markup percentage over the cost. It is quite simple of the company to identify the selling
price and profit percentage of the products and used for the customer contracts. This is best
because here the customer returns all the cost incurred to the seller and also negotiate profit in
addition of the cost (Shojaeezand, Mohammad-Khani and Azmi, 2018).
Problem of using this approach
The problem the company can face while using the cost-plus pricing strategy is as follow:
 Limits the ability of Price segmentation: Basically, this approach limits the company
ability to set the price of the product as per the different segment of the market. Setting
the different prices as per the various customer located in different segment the company
can able to cover large customer base and also earn high profit as compared to cost-plus
price approach.
 Customers don’t care about company’s cost: The company have to understand that the
customers do not put any interest on the cost the company incur to produce a product.
They only have interest to know the attributes of the product and the value it offers to
them. For example, the customers are able to pay high cost for the high-quality
smartphones regardless what manufacturing cost actually bear by the company (Jiang
and et.al., 2018).
 The company is not able to sell value: Under this approach, the company loses their
focus towards the value of their product in the market and also losses the competitive