The method helps to support decisions related to pricing, removing or adding items from the product protfolio and implementing evaluating processes for improvemnets in the organiation. Since these method gives us accurate information about costs it helps us to take more accurate pricing decisions. The method also helps to increase the understanding of overheads and cost drivers and focuses on the non-added values which were ignored by the traditional costing approach which helps the manager to understand what to add and what to eliminate. The method helps to use effective operating costs which can be used in better allocation. It also enhances product and customer analysis of profitability.
So pricing a product too high and too low can cause a serious loss for the sale of the organisation. So there are several pricing strategies that Tesco has adopted to meet its organisational objectives as well as be in competition market. Penetration pricing This is happen when product is sold into a market at a low initial price in order to generate sales before the price is hiked. This type of price strategy is used to break down any barriers but not necessary designed to generate profit. And sometime this pricing strategy is used a short-term to again market share so once Tesco has captured the market price is slowly increased.
Due to imposition of price ceiling, the quantity supplied is lower than that of in normal times. In the above diagram the quantity supplied Qs is corresponding to the price Pc, which is the ceiling price. This quantity Qs way is lesser than the equilibrium quantity Qe which the suppliers would have supplied normally at the equilibrium price Pe. The imposition of price ceiling also creates a high demand in the market. Now the consumers would be demanding the quantity Qd at a price Pc which is lower than the equilibrium price Pe.
Debt ratio lies between 0 to1. Higher value indicates more risk to company and it will be difficult to obtain loans for new projects or expansion of any project. A low value indicates the company is less dependent on the money borrowed from or owed to others and the company has a strong equity position. Times Interest Earned is used to determine how easily a company can pay interest expenses on outstanding debt. Lower the ratio, more the company is burdened by debt expenses.
This means as employees’ nominal wages increase with inflation their real wage (purchasing power of nominal wages) may remain constant. Since inflation reduces the incentive for households to save, it causes a shortage of savings for firms to borrow. Firms finance investment (the purchase of new capital goods) by borrowing money. Therefore, if there is not saving funds for investment will
A firm may be compared to another one which is of a different size, technology and diversification of products. Rations do not consider the effects of inflation on a firm’s performance. For instance, increased sales may be due to increasing the selling price as a result of economical inflationary pressure. Moreover, ratios do not consider the non-quantitative characteristics of the firm such as customer loyalty, technological advancements and the corporate image. Moreover, the computation of ratios occurs only at a certain period of time and is affected by frequent changes thereafter such as cash changes and changes in stock levels.
Moreover, damaged or rejected goods, storage space cost are also classified as holding cost. In term of the view in theoretical point, to determine holding cost is easy because the component of holding cost consist of cost of capital to finance inventory, cost of storage and handling the inventory and cost of risk such as insurance, pilferage, obsolesce and others. Labor cost Labor cost is defined as the cost of total of all the salaries paid to the employees. This is consists of the cost of employees benefits also payroll taxes that paid by an employer. This cost is separated into direct and indirect overhead
INTRODUCTION Economic growth is defined as the increased capacity of an economy to be able to produce goods and services in comparison from one period of time to another. This is figured by the genuine Gross Domestic Product (GDP) and development, and is measured by utilizing genuine terms such as “Balanced Inflation”. These terms help to remove any distorted views on the perceived outcome of inflation on the cost of merchandises produced. Likewise, Economic growth is related to the high expectations in a person’s standard of living. If the standards are high, it wouldn’t be beneficial for the economy as the working class individuals will face a lot of trouble.
Direct verification means verifying an amount or other representation through direct observation e.g. by counting cash. Indirect verification means checking the inputs to a model, formula or other technique and recalculating the outputs using the same methodology. An example is verifying the carrying amount of inventory by checking the inputs (quantities and costs) and recalculating the ending inventory using the same cost flow assumption (for example, using the first-in, first-out method). (FPPFS) Timeliness: Accounting information must be presented in a timely manner to be useful.
An increase in wages leads to a decline in supply of goods and services because labor is considered as a business cost. However, a reduction of labor costs also results in a decline in demand because the supply side creates the demand equation. The reason for this is that as costs of business are reduced by reducing the cost of labor, the result is that there are jobs lost and therefore there is less money on the demand side as well. Where there is a shortage of skills, high wages must be paid to ensure that workers are attracted. However, low skill jobs have many people who can work and therefore the result of this is low wages for such tasks (Gerhard, 2009).