Accounting report to the board of direction

Résumé du document

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.

Extraits

[...] Thirdly, we can price our products by comparing our market share on the product market. Like this, we can justify to the customers our pricing policy. 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). [...]

[...] Bundle pricing: to sell a group of products at a reduced price. Psychological pricing: the seller considers here the psychology and the positioning of the price. Premium pricing: our price has to be high in order to reflect the exclusiveness of this one. 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. [...]

[...] For doing this we can use a product line pricing, competition pricing or a psychological strategy. Thanks to all these elements above we just have to choose what is the better policy pricing for our company and to develop it together. References Books Dury, C (2004) Management and cost accounting. 6th ed, London : Thomson Learning Business Press. Horngren, C.T., Bhimani, A., Foster, G. & Datar, S.M., (2005) Management and cost accounting, 3rd ed, UK, Pearson Education. T.Lucet (1996) Management accounting, 4th ed, London, Letts Educational. [...]

[...] A company can use a number of pricing strategies. The strategies are based on the company's objectives, that is to say means the pricing strategy of the company. (AG Decision maker, 2005) Thanks to this graph we can see that there are a lot of strategies which are available. But that doest not means that there only these strategies below. There exist a lot of other strategies that we can use but we have to take into account the characteristics of our pricing policy. [...]

[...] 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. But, today, a lot of criticisms are made like the trend to ignore the role of consumers and the competitors, the possibility to have over-estimated costs (which can increase the selling price) (Tutor2u, 2006) . [...]