Question

D. Time-and-Material Pricing. 1. Under time-and-material pricing, the company sets two pricing rates a) i. ii. b) i. 2. Using time-and-material pricing involves three steps: a. b. c. 4. The charge for labor time is expressed as a rate per labor hour which includes: a b. c. 5. The charge for materials typically includes a material loading charge which covers the costs of: a. b. c. d. e.

Answer 1

Answer:

1. Pricing under Time and Material Pricing

(a). Priorities Qualities Pricing

(b). Flexible Product & Service Pricing.

Answer - 2

Step - 1 = Specify the Pricing Objectives.

Step - 2 = Determine Cost which will be incurred.

Step - 3 = Evaluate Demand (Identify the target customers).

Answer - 3 = Follwing is the types of charges which includes labour rate per hour.

(a). Gross salary as per applicable law.

(b). Employer Countribution.

(c). Bonus

(d). Vacation Benefits etc.

4. Charged Include in Material Cost :-

(a). Material Purchasing Cost.

(b). Freight / Carriege inward

(c). Loading Charges.

(d). Unloading Charges.

(e). Normal Loss (Leakage, Sharinkage, Theift etc.)

5. To Determine the %age of loading charges Expressed in Total Cost of Parts & Material.

(a). To Determine the total Loading Cost.

(b). To Determine the total Cost of parts and Material.

(c). Determine the %age of Loading cost as mentioned below

Total Loading Cost (Step-1) / Total Cost of Parts & Material (Step-2)*100

6. The Charges of any particular job are includes:-

(a). Cost of Material, Labour and other direct cost.

(b). All types of indirect cost

(c). Margin of the Manufacturer.

G. Cost Based Transfer Pricing.

1. One mathod of determine the transfer pricing is "Resale Price Mathod"

2. Cost based transfer pricing may be based on:-

(a). Arm Length Price.

(b). The Cost Plus Mathod.

(c). The Comparable Profits Method.

(d). The Profit Split Method.

3. The Cost based approach often leads to poor performance evaluations and purchasing decisions. Under this approach the requirements of Capital and Return on Investment are ignored.

H. Market Based Transfer Pricing.

1. The market – based transfer price is based on market’s existing market prices of competing goods. This system often considered the fair market value of the goods and also considered the opportunity cost of the resources.

2. When the selling division does not have excess (idle) capacity, the market price most closely approximates the opportunity cost of the resource.

3. If the selling division has excess capacity, It may sold its products at marginal cost. Which result it will receive a positive contribution margin from any transfer price above its variable cost while the buying division will benefit from any price below the outside price.

4. In many cases, there is not a well - defined market for the good being transfer. As a result , Inter unit transfer is the best option for the organization.