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products and services wherein the   or services.               and making the product viable.
          overhead was apportioned based on   The present methodology adopted
          the activities involved. This major   for determination of cost did not
          invention has resulted in the new   permit to consider these items for   What could be done if the reduction
          fixation of price and hence shaking   the reasons that they are purely   of  cost  reached  irreducible
          the entire market of  the various   financial in nature. While making   minimum
          goods as well as services.     in-depth                          If the cost reduction has reached
                                                                         to irreducible minimum, the
                                                                         alternative way has to increase
                                                                         the selling price of  the products
                                                                         or services to the maximum
                                                                         possible level subject to absorption
                                                                         of   demand of   the product or
                                                                         services in the market. Even at the
                                                                         maximum possible selling price, if
                                                                         the products or services leads to loss,
                                                                         there is no alternative way except to
                                                                         discontinue the product or services.
                                                                           The proposed method facilitates
                                                                         the identification of  the loss
                                                                         making products and to take
                                                                         various measures on cost reduction
                                                                         of  the loss making products
                                                                         and also re-fixing of  the prices
                                                            analysis it is   of  the products if  required, by
                                              found that the expenditure   incorporating the purely financial
                                           incurred or apportionment made   items  by  appropriating  by  using
                         Necessity of    were met from the profit earned   the activity based method and also
                      considering Purely   by the various  commodities  sold   considering the dynamics of supply
                 Financial items         or services rendered by the entity.   and demand of the produces in the
           Traditionally it was believed that   As an example, the apportionment   market. The objective of the new
          certain items are necessarily to be   made to general reserve created   method is to demonstrate how
          excluded for the determination of   might have met from the profits   much maximum money could be
          cost of product as well as services.   earned by the products and services.     earned either by reducing the cost
          As an example, the profit or losses   These purely financial items   or re-fixing the selling price at the
          arising on sale of fixed assets are   were no doubt, not at all required   optimum level and also to take
          treated as purely financial in nature   for the determination of cost, but   decision on the discontinuance of
          and not included in determination   it has to be considered for taking   the products, if the loss incurred
          of  the cost. Advertisement,   various decisions such as pricing   could not prevented by either of the
          preliminary expenses, Share    of the commodities sold or services   methods.
          transfer fee, interest received on   rendered and also to identify the
          bank deposits, dividend, brokerage,   areas of cost reduction  Proposed Model
          discount and commission received   The money generated, which    The following model will assist
          are never to be considered for   has direct nexus with the     not only the identification of the
          costing of goods or services. The   products and services and have   non-profitable  products  but  also
          appropriation of profits for specific   re-appropriated into general reserve   suggest the ways for preventing
          purposes such income tax paid,   and apportionment to taxes etc are   loss generated by such products
          dividend paid, and transfer to   necessarily to be reconsidered for   or services in order to improve the
          reserve was also not considered for   the determination of profitability of   overall profitability of  the entity.
          the determination of cost of goods   products or services for segregating   The various steps involved in the




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