BUSINESS ECONOMICS COURSEWORK Essay Example | Topics and Well Written Essays - 2000 words

BUSINESS ECONOMICS COURSEWORK - Essay ExampleWith cost-plus pricing, the firm can just increase the price. impairment increase is possible due to the fact that at some point, the production be of a product may not be clear in advance. This literally may have significant advantage in cases of supply contracts.Although cost-plus pricing schema may have advantages, it also has remarkable drawbacks which entangle the following ignoring the demand, image, and market positioning favouring historical accounting be rather than replacement value applying standard output level to allocate fixed costs offering few incentives for efficiency, as costs are passed off to customers ignoring the role of customers and the value they drive and creating a competitive disadvantage using average costs (Brickley, Smith & Zimmerman, 2009 BPP Learning Media, 2009, p.302 Holden & Burton, 2010). Perhaps, the most striking of all of these is on how the costs are clearly passed off to customers. Cost-plus pricing may therefore not that competitive in a marketplace where there are new entrants, especially those willing to compete with price by and lowering down their price offerings to generate a market share or acceptance. At some point, cost-plus pricing may trigger a less affinity (less demand) for a certain service or product offering in the long run as competition arises.Cost-plus pricing is a safer pricing strategy on the part of Bhagat Incorporated due to production costs that may not be clear beforehand. It is a natural practice that when a manufacturing companion set the price of a good, the cost of labour is always taken into account (Brickley, Smith & Zimmerman, 2009 Krauss & Johnson, 2006, p.211 Campbell, 2003, p.167). Labour costs are categorised either indicate or indirect (Sears, Sears & Clough, 2010, p.46). The indirect labour costs can be reduced (Appelbaum, 200, p151 Roderhorst, 2009, p.80). If Bhagat has so much increase in its indirect labour costs, accordingly this could be