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1. PRICE/COST ANALYSIS PRESENTED BY: RITU

2. PRICE ANALYSIS The objective of analysis prices is to ensure that the price paid is a reasonable one in terms of the market, the industry,and the end use of the material bought. Price analysis is a means of isolating and possi- bly eliminating items of unnecessary cost.

3. SOURCES OF PUBLISHED PRICE DATA 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. TRADE PUBLICATIONS: there are numerous trade publications that periodically publish current price information. Some examples are: Oil ,Paint and Drug Reporter-chemicals American Metal Market-metals

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. 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. 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.

5. COST ANALYSIS Cost analysis should be employed when price a price analysis is impractical or does not allow a buyer to reach the conclusion that a price is fair and reasonable. It is the element-by-element examination of the estimated or actual cost of contract performance to be determine the probable cost to the vender. The goal is to form an opinion on whether the proposed cost are in line with that reasonably economical and efficient performance should Cost.

6. SOURCES OF COST DATA Cost data from partners: The supply partner will share information on its design, production, and quality processes and on its design and production. 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.

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.

8. DIRECT COSTS AND INDIRECT COSTS DIRECT COST: except in industries with the heavy fixed capital investments , direct costs are normally the major portion of total costs. DIRECT LABOUR DIRECT MATERIALS

9. INDIRECT COSTS Indirect costs represent 30 to 40 percent of many suppliers’ total costs of production. Five of the most common indirect cost pools are: 1. Engineering overheads: cost of directing and supporting the engineering department and direct labour staff. 2. Materials overhead: includes the indirect costs of purchasing, transporting incoming materials ,receiving , handling etc. 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. - cost of supervision,inspection.maintence and related costs. -fringe benefits etc.

10. 4.General and Administrative :includes the company’s general and executive, staff services . 5.Selling : selling expenses - sales salaries,bonuses and commission and the normal costs of running the department.

11. CONCLUSION With the understanding of cost/price principle , the buyer now is in a position to conduct an Analysis of a potential supplier’s proposal.This Analysis is a major step in preparing for negotiation .