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Product Costing and Pricing Doc

   

Added on  2020-03-16

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Running head: PRODUCT COSTING AND PRICING 1Product Costing and PricingNameInstitution

PRODUCT COSTING AND PRICING 2Introduction Product costing is a method used to determine the cost of production per unit or serviceby use of every resource that was engaged in the process while product pricing is the method bywhich the business owner or a manufacturer determines the value at a customer is to buy a givena product or service (Mat & Smith,2014 ). Cost, therefore is the expense met to by amanufacturer to bring a product to the market for the buyer and price is the amount paid by thecustomer for a product or service, and the difference between the amount paid for products andtotal expenses incurred during production is the profit. When determining cost, a business mustsum all the costs of inputs that are essential to produce a given item. When setting the price, anentrepreneur must consider all the costs that were involved in a given production but customerfinally limits the price by way of boycotting buying the product until the value drops to meetcustomer’s value going by the standard of living (Luna-Reyes, Zhang, Whitmore, Jarman, PicazoAndersen & Andersen, 2014).Product Costing and PricingProduct costing and pricing have evolved since from the inception of industrializationwhen mass production was the order of doing business and taken effect toward the second half of20th century (Racz-Akacosi, 2017). Corporate profitability is only possible if all the inputs arekeenly tracked from the beginning to the end of a production. From this perspective,entrepreneurs started assigning certain appropriate percentages to the expenses and otheradditional expenses like transportation, packaging, branding warehousing and advertisements tillwhen customer is reached to buy the product. In-depth data from such analytical sources haveprompted manufacturers to adopt routine product costing that provides feedbacks (Prasad,Venkatesh & Mahajan, 2015). The management is, therefore, enabled to focus on perfect

PRODUCT COSTING AND PRICING 3workflow for purchasing tools which in turn is instrumental in setting exact prices for theproduce.Today, in modern business, product costing and pricing is so important that it greatlyaffects the survival of business in the market. Without product costing and pricing, no businesscan stand the dynamics of production and get its products to the customers at a profit. In short, itis indispensable if any business is to make profit from a given production. For instance, in Japan,manufacturers have embraced different modern styles of costing and pricing so as to fit in themarket as evaluated below;A state of deflation coupled with almost no rules and regulations, and stiff competition hhad serious market impact on the Japanese manufacturing companies. The old-style of reducingprices by Japanese companies so as to gain the lion’s share in the market is long forgottenmoreover, the usual practice of having additional mark-up to cater for manufacturing cost nolonger functions for the companies (Entrop, Fischer, McKenzie, Wilkens & Winkler, 2016).Home prices however, are getting determined by customer demand i.e. what the customer is ableand willing to buy at going price depends on what the market has. Economic stand-stillwitnessed in Japan and the numerous aging populace with low income have greatly reduced acommon Japanese consumer’s income. According to Fullerton, Kennedy & Widener (2014),posits that technology has also worked against the Japanese manufacturers; development ofonline market platforms has propelled online purchases leading to price sensitivity andawareness among the consumers e.g. Amazon and RakutenchiThe above economic and technological challenges has driven the Japanese manufacturersaway from the traditional costing and pricing of products. In order to attract customers to theirproducts, the manufacturers have had to look for other ways of doing it like making their

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