Page 27 - MA - May 2017

The technique explored will facilitate the cost auditor to identify the

unprofitable products and services and for taking adequate action to the

extent required either by reducing cost by adopting cost reduction doctrines

or revise the selling price after apportionment of purely financial items by

adopting Activity Based Method

the cost incurred by the Product A. Market Oriented Pricing Method Method for the purely financial
consists Perceived value pricing, items. The appropriate decision
Step 6: Explore the possibility of Going-rate pricing, Premium could be taken such as taking cost
revising the Selling Price pricing, Discount pricing, Sealed- reducing measures, revising the
After exploring the possibility of bid pricing, Differentiated pricing. selling price etc at the appropriate
reduction of cost the next step is The appropriate pricing of the time. This article will facilitate to
to consider the revision of price. It product may reduce the loss to the guide us when to discontinue of the
is necessary revise the price of the maximum possible extent. products. However for the simplicity
Produce A to the maximum possible the example is restricted to only two
level subject to absorption in the Step 7: Determination of products and the consideration
market. The fixation of the price discontinuance of produce and of the purely financial item for
of the commodities and services services the accounting period. This could
depends not only on costing but From the Table 6, it is found that be extended for more number of
also on several factors such as the unit cost lost for the product products and previous accounting
demand for the products, price A Rs 14.13 per unit under ABC period also. The concepts of bye-
of competing firms, purchasing method. This ABC method is product, joint product was also
power of customers, Government more appropriate to apply as the not considered. The readers may
regulation, marketing method appropriation of indirect cost and explore the possibility of extending
used etc. There are numerous purely financial items are done the concept mentioned to those
methods of pricing methods for the scientifically. situations too.
determination of price of products It is necessary to reduce the
or services. The factors which cost of product A by Rs 14.1 or
are normally considered for the increase the price by Rs 14.13.
determination of the price includes The combination of cost reduction lkailasam@yahoo.co.in
product/service, competition, method or increasing the selling
target audience, product’s life cycle, price may also be considered so that
firm’s vision of expansion, etc. The the product A should not be burden
method of pricing could be broadly to the entity. In both method or by
classified into two categories i.e. the combination, if it is not possible,
Cost Oriented Pricing Method and there is no alternative except to
Market Oriented Pricing Method. discontinue the Product A.
Cost-oriented methods or pricing
includes Cost plus pricing, Mark-up Conclusion
pricing, Break-even pricing, Target The primary objective of the
return pricing and early cash article is to demonstrate the
recovery pricing. On the other hand effective use of Activity Based

www.icmai.in May 2017 l The Management Accountant 27