Accounting report to the board of direction
- Choice of a company's pricing policies.
- Defining the pricing objectives and elements that we have to take into consideration.
- Choice of the strategy.
- Recommendation to the board of direction.
Today our company is using a cost-plus pricing approach to price its product. In fact this method used to price our products can be inadequate in certain cases for our firm. In the usual course this method is used in a monopoly situation. Today, we have to try to notify if our company has a monopoly situation in all its markets for its entire product. Because if we are not in this situation, it can be harmful for our company. That can reach the company's profit and also its bankruptcy. Moreover, by this method, our prices are set only by the offer (only for our company) but not by the demand (consumers) because the price of our products is set by adding a mark-up to cost (Management and cost accounting, 2004). It is true that this method is easy to calculate and to administer; it tends to stabilize markets, insulate from demand variations and competitive factors.
[...] Our pricing policy can also influence our company image (cheaper brand or top of brand), the company position (because the price of our products place us on the market), our profitability (if we use this strategy we have to research by trying to find the better price by testing the market in selling the same product at different prices) (Patsula, 2001). On the other hand, we must be careful to the factors that will influence our product's price. In fact, the prices we charge for our products will depend on the cost of the labour, the raw material, the cost of the machine It depends also on our business, our experience in the product that we sell, the position of the competition, the demand waiting, the legal concerns In fact, I think that, today, we have to calculate exactly how that costs to us to sell one of our products. [...]
[...] Optional pricing: sell the product with all the optional extras to increase the profit. Cost-plus pricing: see paragraph introduction. (Learn Marketing, 2006; Management and cost accounting, 2004). Recommendation to the board of direction You have to know that to choose a policy pricing means also that we have to choose a strategy. I think that it must have only one policy to price all products but we can choose several strategies. First of all, we have to calculate as better as possible how cost to manufacture a product. [...]