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I always worry when I see "price" and "cost" in the same sentence. This is because there is no connection between the price of something and it's cost.
I'll say that again, because it's important. There is no connection between the price of something and it's cost. (Yes of course there are exceptions, such as 'Cost plus contracts'.)
The price of something is how much the owner thinks they can sell it for. The word 'cost' does not appear in that definition.
After the sale, if you want, you can subtract the cost from the achieved selling price to work out the profit.
Traditionally, PCM has been performed by cost engineering experts, or by Value Analysis/Value Engineering (VAVE) team members who specialize in cost reduction and/or support core business functions. These resources typically have strong manufacturing backgrounds and may have worked as a supplier quote estimator. Their expertise is unique and their domain knowledge builds over time, but it is extremely difficult to duplicate and scale across products in a large organization.
Effective PCM requires a set of systematic activities, processes, and tools for use throughout the enterprise to guide the above decisions to the lowest possible costs. This enables manufacturing organizations to attack cost at the point of origin and yield the greatest impact on product cost reduction.
Core Cost Management Activities
There are a number of core activities involved in PCM. Some of the most effective include:
Costing is a part of managerial accounting, which provides significant help towards the successful and accurate costing of a product. This final cost includes the cost of the raw material used, fixed costs of the installations and variable costs in general (including salaries of personnel, electricity etc.), allocated proportionally to each product separately, hence included in the final price. Add your desired profit there and you get the final selling price of your product.
Mind the competition however, you don't want to be very higher than them when it comes to price.
I hope I was helpful.
they can count the direct cost plus the indirect cost plus the percentage of profit
A manufacturer shall continue to produce goods and services as along as marginal cost is less that marginal revenue (considering that there is no resource constraints)
Then,at the cut off point, find the total quantity of goods produced and the amount of labor, capital, raw materials and overhead cost at this stage of production.
Now work backward to see how the cost components could be reduced with more scientific approach or use of technology so that profitability would increase.
Thanks for invitation;
Agree with the answer of Mr. Mohammed Asim Nahel
I fuly agree with the experts' submissions here.
Thanx for the invitation
Attention to raw materials and resources
And the search for alternative materials is always
And choose the right time to buy them