The use of job costing as a tool for the pricing and cost control decisions in the printing industry: the case of Société de Presse et d'Editions (SOPECAM)

SALES ESTIMATES

PROPOSED SELLING PRICE

UNIT FIXED COST

Source: Drury C. Management Accounting (2000)^20(*)

Ø Common fixed costs: this limitation is in relation to the method used to apportion costs and depending on the method used the cost obtained will be different and will therefore lead to a different pricing decision.

Ø Pricing floor: generally, cost based pricing is referred to as a method that gives the seller a little amount of security against loses as the cost are always covered by the selling price. But in real life situation, it is sometimes found that the sales of the product are subject to fluctuations in demand and as such the total revenues may not be able to cover the total costs at certain levels of sales other than the budgeted ones.

Recalling again that these methods are used just as a guide to final pricing decisions, we must not therefore pay too much attention to their limitations, but understand that theses methods are helpful as initial approximations of future selling prices.

* ²⁰ Drury, C. (2000) Management and Cost Accounting, London.