EwE Economics Beth Fulton 2012. Costs and prices Simple bioeconomics Prices xCosts x.
Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.
-
Upload
florence-wade -
Category
Documents
-
view
215 -
download
0
Transcript of Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.
![Page 1: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/1.jpg)
Professional Issues Slide 1
The Structure of Organisations The Structure of Organisations &&
FinanceFinance
Costs and Prices
![Page 2: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/2.jpg)
Costs and PricesCosts and Prices
What’s the difference
Professional Issues Slide 2
![Page 3: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/3.jpg)
Professional Issues Slide 3
Costs and PricingCosts and Pricing
Costs• What it costs YOU to deliver a product or service
Price• Is what your CUSTOMER pays
![Page 4: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/4.jpg)
Professional Issues Slide 4
CostsCosts
Purchase costs– Raw materials– Equipment Costs
Costs of Finance– Interest Payable or Lost
Direct Labour Costs– Salaries– Pensions
Overhead Costs– Premises, Admin, Sales & Marketing– Not attributable to projects
![Page 5: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/5.jpg)
Professional Issues Slide 5
Costs of Running a CarCosts of Running a Car
Cost £10,000Run for 3 yearsSell for £4,20010,000 miles per year
![Page 6: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/6.jpg)
Professional Issues Slide 6
Cost of Running a Car …..Cost of Running a Car …..
Fixed Costs:
Depreciation 5800
Loss of Interest 927
Car Tax 475
Insurance 1500
Total Fixed Costs
8702 29p/mile
Variable Costs:
Petrol 3300
Servicing 300
Total Fixed 3600
TOTAL COST 12302 41p/mile
No Inflation
![Page 7: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/7.jpg)
Professional Issues Slide 7
Costs……Costs……
Fixed– Premises– Administration– Sales & Marketing– Costs of Finance
Variable– Raw Materials– Direct Labour Costs
![Page 8: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/8.jpg)
Professional Issues Slide 8
Fixed & Variable CostsFixed & Variable Costs
Production Units Can Have Fixed Costs– Independent of Sales– Magazine Publishing– Toy Manufactures– Software Development
![Page 9: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/9.jpg)
Professional Issues Slide 9
DepreciationDepreciation
Need to know value of Equipment and StockToo costly to revalue every ItemSimplified:– Straight Line– Reducing Balance
Must be Consistent and Used & Declared in Annual Accounts
![Page 10: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/10.jpg)
Professional Issues Slide 10
Straight Line DepreciationStraight Line Depreciation
Year Depreciation End Year Value
1 2000 8000
2 2000 6000
3 2000 4000
4 2000 2000
![Page 11: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/11.jpg)
Professional Issues Slide 11
Reducing Balance DepreciationReducing Balance Depreciation
Year Depreciation End Year Value
1 3000 7000
2 2100 4900
3 1470 3430
4 1029 2401
![Page 12: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/12.jpg)
Professional Issues Slide 12
Reducing Balance……..Reducing Balance……..
Need to Identify Classes of EquipmentComputers – High depreciation rateBuildings - Low rateCars – Medium rateFurniture – Low rate
![Page 13: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/13.jpg)
Professional Issues Slide 13
Labour CostsLabour Costs
Salary plus on costs:– National Insurance– Pensions
Persons Day rate– Statutory & Ordinary Holidays– Sickness– Training– Idle time– Unchargeable Time
![Page 14: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/14.jpg)
Professional Issues Slide 14
Staff CostsStaff Costs
Total Work Days 260Junior Staff – 220 Chargeable daysSenior Staff - 160 Chargeable days
Junior on £20,000– Cost £24,000 (No overheads)– Overheads £24,400– Cost per day = £220 per day
![Page 15: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/15.jpg)
Professional Issues Slide 15
Overhead CostsOverhead Costs
Not Attributable to Particular project– Building Costs– Administration
• Personnel• Finance• Sales & Marketing• Support
Fixed Costs and are very Real!!Computer Industry– 100% Small Company– 200 – 250% Large Company
![Page 16: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/16.jpg)
Professional Issues Slide 16
PricingPricing
![Page 17: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/17.jpg)
Professional Issues Slide 17
Pricing in the Computer IndustryPricing in the Computer Industry
Cost Plus ServicesFixed priceProducts
![Page 18: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/18.jpg)
Professional Issues Slide 18
Cost Plus - Project WorkCost Plus - Project Work
Agree with Client your Costs per day– Usually on Direct Labour– Overhead
Agree Profit margin“Body shopping”Unsuitable today for projects but used to supply skills/experience to customer projects
![Page 19: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/19.jpg)
Professional Issues Slide 19
Fixed price – Project WorkFixed price – Project Work
Total of:– Direct Labour– Bought in Items– Indirects
Profit addedUsed in Competitive TenderingRisks versus Profit
![Page 20: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/20.jpg)
Professional Issues
Project Costings for F P jobs
Companies may differ in the way they do this but basically the same idea
![Page 21: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/21.jpg)
Professional Issues
Labour Costs
Arrange staff into levels, grades etc
Work out average salary in each grade
Work out average daily salary in each grade
![Page 22: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/22.jpg)
Professional Issues
Labour Costs cont’d
Add to daily amount a sum of money to cover the overheads
Therefore if all fee paying staff work then we can cover our costs
![Page 23: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/23.jpg)
Professional Issues
Add it up with more amounts!!
Add contingency
Add Hardware
Add Mark up
Add Profit
Arrive at the final “Price”
![Page 24: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/24.jpg)
Professional Issues Slide 24
Software Product PricingSoftware Product Pricing
Marginal Costs Very Low• Manual, Box and CD Rom < £10.00
Large Development Costs
Amortised over time
Sales proportional to marketing
Sales fall with increasing price
![Page 25: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/25.jpg)
Professional Issues Slide 25
Customer ExpectationsCustomer Expectations
Price Nature (Low to High)
Free Shareware etc. Some great products (Winzip)
£20 Buyer’s Risk – Internet Sales
£100 -£500 High volume - Real Software – Microsoft, Adobe
£10,000 Real product – low volume – Bugs and Support
£100,000 On the drawing board!!
![Page 26: Professional Issues Slide 1 The Structure of Organisations & Finance Costs and Prices.](https://reader036.fdocuments.in/reader036/viewer/2022062518/56649e025503460f94aec3ee/html5/thumbnails/26.jpg)
Professional Issues Slide 26
Support and other IssuesSupport and other Issues
Large percentage of income• 10% - 25% of turnover• Sage, Microsoft
Support & UpdatesMust be Real and Valuable
Annual Licence fee chargesPer use ChargesApplication Service Providers