The Absorption Costing Approach to Cost-Plus Pricing

The Absorption Costing Approach to Cost-Plus Pricing Allocating a fair and proper price to a product or service may be a tricky balancing act for a company. Many firms have an ongoing struggle with setting their pricing strategies. It is a well known fact that the success of any product or service relies straight on the ability to sell them which anon directly depends on the correct pricing strategy (Bosse, 2009). The pricing cannot be just randomly guessed by the company. There are several measures that ought to be considered while forming the pricing strategy. By implementing creative judgments and intensifying the awareness of consumer motivation, a company can seize the market. Pricing is not merely a marketing, financial or operational decision; instead it influences all aspects of the firm (Petersn, 2008). Preliminary Situation for Pricing Erner (2010) mentions two possible situations to consider for pricing: The first one declares that the product in question has several competitors who offer products with less differentiation. Hence a market price already exists. In this case customers will not purchase products with high market prices. Therefore the company does not have to conduct extensive research about the pricing strategy as they already have a guideline present. The second situation indicates that the market price does not exist. Herein the product does not have any direct competitors and no pricing standards are available. The company has to decide how to price its products or services. In such a position the company must emphasize more on market research, customer perception, costing, price testing etc. (Hilton, 2009). The Absorption Cost Approach to Cost-Plus Pricing For pricing decisions accounting information can be used especially if the firm is a leader in the market or a price-maker. As there is hardly time for analyzing demand and marginal cost for each product or service thoroughly, managers have to depend on a swift and unsophisticated method for determining prices. Therefore companies apply the Cost-Plus Pricing (CPP) method in which the total cost of the product or service adds a margin to ascertain the selling price (Hilton, 2009). However many companies are price-takers as they set their prices according to the market leaders and have to follow the market, adjusting their prices due to competition. Even in such cases understanding costs supports making managerial decisions e.g. which and how many products or services should be produced (Pietersz, n.g.). To give a considerable return on the stockholders investment the determined price in pricing standard products must cover all costs such as production, administrative, fixed and variab le sales cost (Erner, 2010). As this should not be the case the business will bear losses and may not even be extant. Comprehending the companys marketing strategy is required for applying cost information in pricing decisions (Collier, 2009). COST + MARK UP = SELLING PRICE (Ingram, Albright, Hill, 2003) Determine the Cost Coverage Before adding a desired profit margin the full costs  [1]  for each product or service has to be calculated (Ingram, Albright, Hill, 2003). Flowingly the company has to underline the cost coverage that can be done by the Absorption Cost Approach (ACA) or the Contribution Approach (CA) (Erner, 2010). In the pricing decision the unit cost of a completed product is a key measure. The so called Unit Product Cost (UPC) stipulates the value of goods inventory completed and the cost of sold goods (Tatum, n.g.). On the one side variable costing classes costs according to their behavior into variable or fixed. For determining the UPC variable costing only includes costs directly varied to production i.e. direct material and direct labor cost as also the variable manufacturing overhead. The fixed manufacturing overhead costs are dealt like period expenses i.e. expense them like selling and administration cost in the period in which they incur. Fixed costs are not regarded in variable UPC. On the other side absorption costing classes the costs according to their function either into manufacturing or non-manufacturing costs. For calculating the UPC by applying the ACA all manufacturing costs, variable or fixed, are included (Ingram, Albright, Hill, 2003). Contribution Approach In the CA the cost base consists of the variable expenses associated with a product. The mark-up used must include the fixed costs considering the desired profit per unit. The cost base must be kept free of any element of fixed costs facilitating the pricing in special situations (Guilding, Drury, Tayles, 2005). In this paper the CA is not considered in detail. Absorption Cost Approach In the ACA the cost base is defined as the cost to manufacture a single unit. The selling and administration costs which are not included in the cost base are considered in the mark-up stage that is added on to the target selling price (Guilding, Drury, Tayles, 2005). The ACA illustrates the pricing decision as deceitfully easy. It seems that a company only has to calculate its UPC, determine the profit level they want and set the price. It appears that a company can ignore demand and arrive at a price that will safely yield whatever profit it wants (Garrison, Noreen, Brewer, 2010, p. 760). The ACA depends on unit sales predictions and nor the UPC nor the mark-up can be determined without them. In this approach it is anticipated that customers need the predicted unit sales and are willing to pay any price the firm stipulates. But customers have a choice as they can either purchase from a competitor or decide not to buy the product at all if the price is set too high (Garrison, Noreen, Brewer, 2010). Determine Mark-up for Absorption Cost Approach A mark-up is the percentage added to cost for profit, whereas the margin is the percentage of the selling price that is represented by profit (Collier, 2009, p. 173). The ACA and CA both bury some cost elements in the mark-up. The mark up percentage has not only to cover the buried costs but also has to generate a satisfying return on assets employed (Erner, 2010). The mark-up over cost ought to be set according to the market conditions, but many firms rest their mark-up upon desired profit and cost (Garrison, Noreen, Brewer, 2010). The formula for determining the right mark-up percentage by applying the ACA is as follows (Garrison, Noreen, Brewer, 2010, p. 759): Mark-up % = (required RoI x investment) + selling and administrative expenses / (UPC x unit sales) Adjust Price to Market Conditions The final stage considers adjusting the prices pursuant to the market conditions. The CPP usually tends to ignore the relationship between the price and the volume to be produced which in turn can result in lower profits, insufficient demand etc. Thus the sales forecasts need to be met in order for the pricing to be reliable. The final selling price may be much higher than the figure received due to the mark-up stage as companies (can) ignore the competitive positioning, promotional strategy, product differentiation, packaging etc. (Erner, 2010). Practical Example To illustrate an example  [2]  of CPP using ACA it is assumed that Company X just underwent some design modifications for their product Y and wants to set a selling price accordingly. The cost estimates are as follows: The first step in ACA is to calculate the UPC which is illustrated in the following calculation. Here it adds up to à ¢Ã¢â‚¬Å¡Ã‚ ¬ 23.50 per unit as a volume of 10 000 units is assumed for Company X: Several companies set their profit on costs and desired profits. This can be illustrated by using the given formula for mark-up percentage for ACA (see 2.2 Determine Mark-up). To illustrate how the formula is applied, assume Company X invests à ¢Ã¢â‚¬Å¡Ã‚ ¬ 100 000 in operating assets like e.g. equipment to produce and market 10 000 units of the product each year. Further suppose Company X needs 20% RoI. So the mark-up calculations are as follows: Mark-up % = (20% x à ¢Ã¢â‚¬Å¡Ã‚ ¬ 100 000) + (à ¢Ã¢â‚¬Å¡Ã‚ ¬ 2 per unit x 10 000 units + à ¢Ã¢â‚¬Å¡Ã‚ ¬ 60 000) / (à ¢Ã¢â‚¬Å¡Ã‚ ¬ 23.50 per unit x 10 000 units) Æ’Â   42.55% The Mark-up of 42.55% resulted to a Target Selling Price of à ¢Ã¢â‚¬Å¡Ã‚ ¬ 33.50. Only if Company X really sells its 10 000 units at this price the products ROI will be 20%. Logically the ROI will decline if fewer products are sold. The betoken volume of sales is achieved only when the required ROI will be reached.

My Career as a Pharmacist

According to the L.A. deputy district attorney who prosecuted Winona Ryder for shoplifting in 2002, the whacked-out actress was a walking pharmacopeia. When she was arrested, Ryder was carrying eight (yes, 8) different types of painkillers and tranquilizers in her purse. Ryder insisted that she had prescriptions for all but one of them. That was true. She neglected to mention, however, that she had used several bogus names to get them (http://anecdotage.com/index. php?aid=17259). From this anecdote, I come to realize more the Great responsibilities of a pharmacist, one of our next-door heroes where we entrust the community and our family’s health. With the great deal knowing how a medicine works and what its composition to say its safe for human consumption were the few things learned during the academic years. But why did I choose this career, what is Doctor of pharmacy had to do with my lifetime goal? What will it take me to be successful with my chosen choice of career? With the increasing number of school offering Pharmacy, candidates competing for available seats are just few proofs that the career I have chosen despite its complexity is more than the job with multiple offers. It’s well paid and well respected in the field of medicine. With the enormous demand for pharmacy professionals one have to consider the rigorous requirements of becoming a Doctor of Pharmacy, a professional degree that needs prior college level of study. For some instances, people who finished a five years pharmacy degree may seek Pharm. D. But this is just one step of becoming a registered pharmacist, there still the preparation and completion of pre-pharmacy requirement, and after that the preparation again for passing the licensure examination. After all of these undertakings, it is now worthwhile that my dreams and goals are materializing, being a part of a medical healthcare team, in touch with people for best drug and non-drug treatment for particular illness, gender and sex, as I can work inside a healthcare facility or being simply a retailer. The continuous modernization in drug therapy that goes with development of technology gives me more excitement because it meant for the increased demand for pharmacist. The work I am competent in, my passion. In this time of modern innovations my career gives me an ongoing enthusiasm for improvement. Accessibility of pharmacies plays a key role in drug distribution during emergencies or simply seeking advice for a particular medicine, prescribing the best drug without its side effects. With the â€Å"war on drugs† between lawmakers and pharmaceutical company, I can only hope that public will benefit, for cheaper generic prescriptions. There may be growing competitions in this field but the zeal and enthusiasm in me create a positive impact. I know that quality and success don’t happen overnight. A passion you have to do from start to finish. Thus, each day I woke up I see to it that it is full of energy and inspiration, because I am meeting different people with different needs on medications and alike. You don’t know whom the medicine for and what’s in their heart that they carry. Remember that being a registered Pharmacist doesn’t end on giving the right medical information and advice but doing a job well done is staying the person you are. Sharing a smile is more than just the best drug you suggest to use but the hope you impart on their soul. This makes my work and passion more rewarding. REFERENCES Whaley, Bryan B.(2000). Explaining Illness: Research, Theory and Strategies. Mahwah, New Jersey New Jersey: Lawrence Erlbaum Associates. iii Winona Ryder: Walking Pharmacy (2002). Retrieved from the Web June 1,2006.   

Poem Analysis: Mid-term Break Essay

Seamus Heaney himself is the narrator in the poem, Mid-term Break, a sad story from his childhood. It depicts the reactions of everyone around him and of himself to a death in the family. It does this through the poem’s three parts: the waiting at school, the behaviour of everyone at home, and his solitary viewing of the body. This poem is unsentimental but full of emotions. The first stanza introduces Seamus sitting alone at school, in the â€Å"sick bay†. He is waiting, and time passes slowly as he counts â€Å"bells knelling classes to a close†. This tells the reader that the mid-term break is not a school holiday, as classes are still taking place. The boy is eventually picked up by his neighbours, which shows the reader that his parents are too busy to pick up their son, so it must be an important occasion. The next stanza starts with Seamus arriving home, and in the porch meeting his father, who is crying. This stanza tells us that we are witnessing a funeral. The reader still does not know who has died, but we know that it is a family member, perhaps a sibling or even the boy’s mother. In the third stanza, the baby â€Å"cooed and laughed†; this shows the baby’s innocence and lack of awareness of what is happening. At this point the only emotion that the narrator expresses is embarrassment by the way older men are treating him; like an adult. The fourth stanza describes the way the guests at the funeral react to the boy. He is conscious of the way he is being observed and talked about; this reinforces the idea of the boy having to grow up for this event. The last line in the stanza introduces the boy’s mother; so another family member is eliminated from the mystery of who has died. The next stanza begins with his mother expressing her emotion: â€Å"angry tearless sighs†, a contrast to both the boy’s stated emotion and his father’s reaction. In this stanza, the ambulance arrives, and the â€Å"corpse† is taken into the house. The sixth and seventh stanzas depict the next morning and the boy visiting the room where the body is laid. Everything he observes is understated, and we find out that the funeral was that of someone who had been hit by a car and killed. In the last stanza we learn that it was a young child who has died, and come to realise that it was in fact Heaney’s brother. This makes the stanza brutal, hard, shocking and unforgettable, as a child has lost his life before it has truly begun. The words are nearly all emphasised, so the reader must take in the line’s message and the shock and deep grief that the family must have felt. The shock for the reader is that as we find out who died, we also find out that the boy was a mere four years old. There are eight stanzas in the poem. The first seven consist of three lines, and the last comprises only one. The rhyming in the poem is not strict: for example â€Å"close† and â€Å"home† both have the ‘o’ sound but are not total rhymes, and â€Å"crying† and â€Å"stride† both have the â€Å"i† sound. This very loose rhyming scheme is present throughout most of the poem and creates the impression of story telling. The exception to this is the last two lines, which form a rhyming couplet to make an impact: â€Å"no gaudy scars, the bumper knocked him clear. /A four foot box, a foot for every year†. The poem contains eight sentences, which run through the lines and the stanzas, making the poem less like a poem and more like a story. The sentences are a mixture of lengths, which makes some of them very simple, for example â€Å"Next morning I went up to the room.† Others, in particular the sentence which starts with the third stanza and runs through into the fifth, are very descriptive and show that he is taking everything in at once. The mood in the poem is sombre and sad. The tone of the poem is one of sorrow, grief, hurt and distress. The father is crying, the mother is so distraught she cannot cry. Heaney does not state his own emotions, but it is clear that he is hurting and however much he hides it, the reader can sense it through the poem’s tone. The language in the poem is vernacular or every-day, simple, sparse and clear. This almost â€Å"un-poetic† language reduces the poem to its bare essentials and this makes the impact of the awful event stronger and more effective. Just as the body has no â€Å"gaudy scars† the poem has no flowery, overblown descriptions. Onomatopoeia, such as â€Å"cooed† and â€Å"whispers† are used to reinforce the quietness of the poem and of death. Others, such as â€Å"coughed† and â€Å"knocked† break the silence and show the horror of what has happened. When the body first arrives, Heaney distances himself from it by calling it a â€Å"corpse†; he is reluctant to admit that it is a person. However, as soon as he sees the body, he admits to himself that his sibling is dead, and uses personal pronouns such as â€Å"him†, â€Å"his† and â€Å"he†. The title of the poem can have lots of meanings. At first the reader might think of a holiday, the normal meaning of a mid-term break, but after reading the poem, we know that this was not the case. Instead, the title can be associated with the boy who has died; mid-term, as in mid-life, in other words the untimely and unexpected death. Another meaning can be that the family has been broken in the middle of every-day life. The reader himself can decide which of these Heaney meant the title to be. The alliteration in the poem brings out sounds to aid the images. The hard ‘c’ sounds at the start and the end, â€Å"Counting bells knelling classes to a close† and â€Å"knocked him clear†. The harsh sound is suggestive of his way of dealing with grief, letting his locked up emotions come out in his words. Those hard sounds contrast with the soft â€Å"s† sounds in the seventh stanza: â€Å"Snowdrops and candles soothed the bedside†. These soft sounds show that Heaney is literally soothed by the c andles and flowers. There are very strong images in the poem, the first of which is in the second line: â€Å"bells knelling† are associated with death and â€Å"to a close† also suggests the finality of death. One of the more striking images is the image of the â€Å"snowdrops and candles†. Snowdrops are white and pure, which suggests innocence. Snowdrops grow up through frost and they represent a symbol of new life after death. The candles have a symbol of remembrance, and give a hint of religious significance. There is one main metaphor in the poem: the dead child is â€Å"wearing a poppy bruise†. The idea that he is wearing the bruise gives the idea that it can almost be wiped off, or that it is not really part of the boy. This shows the reluctance of Heaney to admit that his younger brother is dead. This is echoed in the simile of â€Å"He lay in the four foot box as in a cot†; he would rather that his little brother is sleeping, not dead. In twenty-two lines of simple language, almost prose; Seamus Heaney has created a striking and shocking picture of the tragic death of a child. The poem is deceptive in its simplicity because it is full of imagery and has a deep impact. Without allowing himself any sentimentality, Heaney leaves us with a deep impression of the effect of the boy’s death on the whole family. The last line in the poem, â€Å"A four foot box, a foot for every year†, is one that is very famous. This is because it stays with the reader long after they have read the poem.

My First Field Work With Jordan Haley And Jaycie Kim Essay

On October 4th, I did my first field work with Jordan Haley and Jaycie Kim. We decided to go to the Orangewood Foundation, which is in Santa Ana. We met up there at 9am and waited to meet with Mike McKenzie who is a program supervisor there. We talked to him in a small conference room for a little over 30 minutes until he gave us a small tour around. Overall, we were there for a bit over an hour. My first impressions of the site were that it was a nice building. It had a welcoming atmosphere. I love the color orange which was present there and I remember their logo, a colorful butterfly, making me happy. When I walked in, I went up to the lady at the front desk to ask if Jordan and Jaycie were there yet and she was very kind to me. I talked to her again later when Jordan and Jaycie arrived and she was eager to help and told us she would tell Mike McKenzie that we were there. While we waited, I saw some young adults walk around but I could not tell if they were any of the â€Å"clien ts† the organization serves. I did not observe any of the staff helping any of their â€Å"clients† while I was there. What I noticed about the â€Å"helpee/helper† relationship was that the helpers try to act as some sort of mentor for the foster care kids but are also friendly. This was a positive experience for me. It is always wonderful seeing people dedicating their time towards helping others. Nice to see how much Mike McKenzie cared about foster care kids and how passionate he was. We told us he