Types of costing
General method of costing
Market based costing
Social costing
Input based costing
Costing and pricing
Is a costing technique where inputs are linked to outputs
In market based costing specific class is targeted for e.g 7up diet
The product which will be going to sell in the market create social positive impact or negative impact on the customers. This is positive or negative social costing
For example
The product used as a drug in the market is negative social costing
Costing and pricing are two different terminologies
Costing
Pricing
Price is the amount a customer is willing to pay for a product or service.
Cost is typically the expense incurred for a product or service being sold by a company.
Market based costing
Example
Designer dresses
Maria B. suit 1 Rs.26000. 1000 suits*26000= 26000000
The suit didn't cost Rs. 26000
Consumer psychology based costing
It doesn't need costing
Low cost
Low cost doesn't create social impact on elite class
Big brands do input based costing
The way the product is presented also matters
For example
If designer dresses sell outside their outlets people will not but them. They will buy them only from their outlets
Price
Costing+Profit-Taxes(optional)= Price
Universal Price
Equal price for all the target market
This is welfare
Competition based on two features
Competition on quality
Competition on price
People are price oriented
People are quality oriented
For e.g
People in Pakistan are price oriented
For e.g
People in America are quality oriented
We have to focus on both price and quality in our product
After calculating product cost we have to compare product quality features with the product cost
Welfare
For e.g
Mobile phones are expensive and cheap as well but the difference between them is the quality
Product will not generate society discrimination, product is for the welfare of people
For welfare the product cost should be low
The product is for welfare everyone can afford the product
Product based on anyone of the following
Welfare product
Profit maximization and welfare both
Profit maximization
Welfare
Certain % of profit should be given for welfare
For e.g
Edhi center
Product include both costing and pricing
Costing and pricing
Costing
Pricing
We do pricing for profit planning
We do costing for product
First do costing then do pricing
Through costing calculate cost then find per unit cost then add profit
To reduce cost increase quantity of the product