PRICE/COST ANALYSIS<br />PRESENTED BY: <br />RITU<br />
PRICE ANALYSIS<br />The objective of analysis prices is to ensure that <br />the price paid is a reasonable one in terms o...
SOURCES OF PUBLISHED PRICE DATA<br />VENDER: many materials traditionally are priced on the basis of published price list;...
GOVERNMENT: Both the Bureau of Labor Statistics and the Indian department of commerce issue  a wealth of price information...
COST ANALYSIS<br />Cost analysis should be employed when price a<br />price analysis is impractical or does not allow a<br...
SOURCES OF COST DATA<br />Cost data from partners: The supply partner will share information on its design, production, an...
Cost data from cost models: It may be necessary for the purchasing firm to develop its own cost models  to estimate what t...
DIRECT COSTS AND INDIRECT COSTS<br />DIRECT COST: except in industries with the heavy fixed capital investments , direct c...
INDIRECT COSTS<br />Indirect costs represent  30 to 40 percent  of many suppliers’ total costs of production.<br />Five of...
4.General and Administrative :includes the company’s general and executive, staff services .<br />5.Selling : selling expe...
CONCLUSION<br />With the understanding of cost/price principle ,<br />the buyer now is in a position to conduct an <br />A...
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Price

  1. 1. PRICE/COST ANALYSIS<br />PRESENTED BY: <br />RITU<br />
  2. 2. PRICE ANALYSIS<br />The objective of analysis prices is to ensure that <br />the price paid is a reasonable one in terms of <br />the market, the industry,and the end use of the<br />material bought.<br />Price analysis is a means of isolating and possi-<br />bly eliminating items of unnecessary cost.<br />
  3. 3. SOURCES OF PUBLISHED PRICE DATA<br />VENDER: many materials traditionally are priced on the basis of published price list; it involves a “list” price for each item, which is then subject to a scale of trade discounts for either various quantity , brackets or for various classes of customers.<br />TRADE PUBLICATIONS: there are numerous trade publications that periodically publish current price information.<br />Some examples are: <br /> Oil ,Paint and Drug Reporter-chemicals<br /> American Metal Market-metals <br />
  4. 4. GOVERNMENT: Both the Bureau of Labor Statistics and the Indian department of commerce issue a wealth of price information on commodities and manufactured goods.<br />PRICE RECORDS : Historical records are invaluable as a tool for checking current price against price previously paid, as well as for establishing price trends and as basis for forecasting prices.<br />QUOTATIONS: The buyer should assure himself that each bidder is capable of supplying goods of the proper specification with regard to quality, delivery requirement, packaging etc.<br />
  5. 5. COST ANALYSIS<br />Cost analysis should be employed when price a<br />price analysis is impractical or does not allow a<br />buyer to reach the conclusion that a price is fair<br />and reasonable.<br />It is the element-by-element examination of the <br />estimated or actual cost of contract<br />performance to be determine the probable cost<br /> to the vender. The goal is to form an opinion on<br />whether the proposed cost are in line with that <br />reasonably economical and efficient performance should <br />Cost. <br />
  6. 6. SOURCES OF COST DATA<br />Cost data from partners: The supply partner will share information on its design, production, and quality processes and on its design and production. <br />Cost data as a precondition of bidding :When a buyer anticipates that cast analysis will be required ,he or she should includes a request for a cost breakdown with each request for quotation.<br />
  7. 7. Cost data from cost models: It may be necessary for the purchasing firm to develop its own cost models to estimate what the supplier’s costs should be.<br />
  8. 8. DIRECT COSTS AND INDIRECT COSTS<br />DIRECT COST: except in industries with the heavy fixed capital investments , direct costs are normally the major portion of total costs. <br />DIRECT LABOUR<br />DIRECT MATERIALS <br />
  9. 9. INDIRECT COSTS<br />Indirect costs represent 30 to 40 percent of many suppliers’ total costs of production.<br />Five of the most common indirect cost pools are:<br /> 1. Engineering overheads: cost of directing and supporting the engineering department and direct labour staff.<br /> 2. Materials overhead: includes the indirect costs of purchasing, transporting incoming materials ,receiving , handling etc.<br /> 3. Manufacturing overheads: it includes all production costs except direct materials,labour and similar costs that can be assigned directly to the production of an item.<br /> - cost of supervision,inspection.maintence and related costs.<br /> -fringe benefits etc.<br />
  10. 10. 4.General and Administrative :includes the company’s general and executive, staff services .<br />5.Selling : selling expenses<br /> - sales salaries,bonuses and commission and the normal costs of running the department. <br />
  11. 11. CONCLUSION<br />With the understanding of cost/price principle ,<br />the buyer now is in a position to conduct an <br />Analysis of a potential supplier’s proposal.This<br />Analysis is a major step in preparing for negotiation .<br />

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