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Cost Analysis And Ethical Considerations

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Running head: COST ANALYSIS AND ETHICAL CONSIDERATIONS 1

Cost Analysis and Ethical Considerations

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COST ANALYSIS AND ETHICAL CONSIDERATIONS 2

Cost based pricing

Cost based pricing would take into account both variable and fixed costs, and would

mark-up the total at a certain specified percentage. In determining the selling price of the

blenders, the production cost would be considered, and a profit element would be added to it.

Cost based pricing can help with competitive bidding due to the ability to lower costs and in

return set low prices for the blenders. With proper cost reduction strategies, the organization

would be able to produce blenders at the minimum possible cost, leading to sustainable profit

margin, while ensuring market competitiveness on the basis of pricing. This would mean

producing in large quantities to minimize the weight of fixed costs, and minimizing variable

costs and raw material wastage.

Cost based pricing approach is straightforward, simple, and would ensure that all

costs incurred in manufacturing the blenders are considered in pricing. Using this approach,

the organisation can align the percentage mark-up with its current and long-term goals. In

addition, a consistent profit generation would be ensured and the pricing can be adjusted as

per blender specifications by the buyer (Jiwoong Shin, 2007). However, this approach is

likely to ignore the role which consumers and other market forces play in the pricing process.

A product may also be under-priced compared to products offered by competitors.

Market Based Pricing

Under this approach, pricing for the blenders would be set as per the current market

conditions. This would mean comparing competitors’ products with the organization’s

products, and determining prices accordingly. In this case, the organization would compare

its blenders’ features with close competitors,’ and if the organisation’s products are better, the

company can set same prices as competitors to enhance competitiveness on the basis of

quality, or can set higher prices on the account of better quality and additional

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Running head: COST ANALYSIS AND ETHICAL CONSIDERATIONS Cost Analysis and Ethical Considerations Name Tutor Institution Course Date 1 COST ANALYSIS AND ETHICAL CONSIDERATIONS 2 Cost based pricing Cost based pricing would take into account both variable and fixed costs, and would mark-up the total at a certain specified percentage. In determining the selling price of the blenders, the production cost would be considered, and a profit element would be added to it. Cost based pricing can help with competitive bidding due to the ability to lower costs and in return set low prices for the blenders. With proper cost reduction strategies, the organization would be able to produce blenders at the minimum possible cost, leading to sustainable profit margin, while ensuring market competitiveness on the basis of pricing. This would mean producing in large quantities to minimize the weight of fixed costs, and minimizing variable costs and raw material wastage. Cost based pricing approach is straightforward, simple, and would ensure that all costs incurred in manufacturing the blenders are considered in pricing. Using this approach, the organisation can align the percentage mark-up with it ...
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