1. CHAPTER 18
PRICING DECISIONS
Case 1 Jagdamba Caterers
Question: 1 Explain which type of costs for jagdamba services are calculated in the preceding
bid?
Jagdamba caterer’s labour and profit are embedded in the material prices quoted. The cost
includes labor cost, material cost & rent (of linen, glassware & dinnerware). Food preparation
includes numerous activities & cost associated to it such as recipe selection, purchase of
ingredients and preparation of food, transporting the material/food to the Arts and Humanities
Building, arranging the table, keeping it stocked throughout the party, charges of bartender &
serving staff and cleanup.
Question: 2 Divya was shocked after the preceding bid. She suggested that they had hoped to
spend not more than Rs 750 on the party. How could Jagdamba achieve a target cost of that
amount?
Jagdamba will have to arrange a meeting with the Arun and Divya so that they can discuss which
factors are to be given priority and which are less important. For example, perhaps the wedding
cake could be replaced by a simple party cake. The party time could be reduced from three hours
to two hours. Arun & Divya can keep an option of hiring tables and linens from other
economical sources rather than hiring it from jagdamba caterers or they can provide linens of
their own & rent only tables. The cost of open bar and bartender could be avoided by providing
mocktails, welcome drinks or juice. Menu can be changed for the party & it could be such that
can reduce the overall cost per plate.
Question: 3 Arun was appalled at the price of the wedding cake. “I can get a box of cake mix at
the store for Rs 30”, he sputtered angrily. How would you respond to this remark if you were
Jagdamba?
Jagdamba should try to convince Arun that the cake mix does not include some significant
ingredients such as butter, eggs, icing sugar for decorating the cake & their cost is also to be
incurred along with the cost of cake mix. Additionally, no cake mix is available in market to feed
75 people & in addition to that the time that is required to prepare the cake is also not taken into
consideration by Arun. She should highlight the costs that are included in her quoted price i.e
Rs.75. For example, the cake price of Rs. 75 also includes the cost of the pans, spatulas, grease
(to grease and flour the cake pans), usage of oven which will result in electricity consumption,
and other utilities. Most important, of course, is the value of caterer’s time and expertise in
preparing & decorating the cake.