Introduction
Price analysis in Universal Drones Inc. is meant to examine and evaluate proposed prices by investigating its separate cost elements. For the company’s prices to be effective, they must tally with the prevailing market costs. The objective of this paper is to provide the firm with foresight in the prevailing prices and overheads to understand market behavior. It will analyze the various types of expenditure and determine their overall effect on the institution.
Analysis of Universal Drones, Inc.’s Cost Classifications
Reasonable, Allowable, and Allocable Costs
Cost classifications such as reasonable, allowable, and allocable costs help management to effectively control outlays. A cost is reasonable if it is not more than the exact price incurred under the given circumstances. The applicability of reasonable cost is considered sound due to the prevailing high market prices for drones. The firm’s costs are allowable when they are considered to have reasonable and allocable characteristics. It means they adhere to the standards approved by the government on both reasonable and allocable costs. Some of the examples include brokerage fees, premiums, and commissions. Allocable costs apply in the sense that the enterprise products directly provide benefits to the government. They entail allocable and reasonable costs to the contracts signed by the organization and other stakeholders (Yue et al., 2019). Examples are the costs of approved pieces of drone equipment and chemicals for running the project. They are vital since they exist on a daily basis in the management process of the company.
Analysis of Volume Based Costs
Fixed, Variable, and Semi-Variable Costs
The main volume-based overheads in the daily management of the firm include fixed, variable, and semi-variable costs. The firm’s fixed costs are negotiated for a particular time period; hence, they do not vary with the changing production levels. Examples of fixed costs in the enterprise are mortgages and health insurance premiums. The variable costs are those which adjust with the increase in the production of drones. Examples of variable expenses include the expenditure on chemicals and equipment used in drone manufacture. Semi-variable costs are not distinguished in the firm’s financial statement. They consist of both variable and fixed costs and include overage charges and commission payments (Palmer et al., 2018). The volume-based costs directly impact the organization’s financial statement; therefore, they are given special attention and considerations in the business.
Pricing Analysis by the Government
Comparison of Proposed Prices, Market Based Prices, and Prior Proposed Prices
The major value analysis used by the government is proposed charge comparison, market-based consequences, and prior prices. Proposed pricing is the practice of probing and evaluating the anticipated fee to establish whether it is reasonable and fair without the assessment of its separate projected profit and cost elements. To be rational to the government, the business will compare its worth with commercial penalty and independent government estimates. Market-based pricing is the industry-oriented valuation of products or services in the market (Palmer et al., 2018). It entails a comparison of drone costs with the worth of other products available in the market. The government adopts value analysis to ensure that there are reasonable and fair prices in the marketplace.
Market-based pricing is logical because of other market data without price competition costs which might damage the firm. Previously proposed costing is a past penalty related to the prior purchasing activity. It is the most reasonable form of fee since it gives market trends over a given period of time (Basu, 2019). It is the best choice for the government for its adequate consequences competition based on the outlay analysis.
Conclusion
Considering all the rate determinants enables Universal Drones Inc. to set competitive prices which will match its products’ quality and efficiency. It will ensure that customers obtain value for their money. In turn, it will result in consumer satisfaction and loyalty. Both cost and price analysis will also ensure the company’s sustainability by enabling the business to learn the prevailing market trends and adjust accordingly.
References
Basu, S. (2019). Are price-cost markups rising in the United States? A discussion of the evidence. Journal of Economic Perspectives, 33(3), 3–22. Web.
Palmer, K., Tate, J. E., Wadud, Z., & Nellthorp, J. (2018). The total cost of ownership and market share for hybrid and electric vehicles in the UK, US, and Japan. Applied Energy, 209, 108–119.
Yue, A., Li, L., Khandelwal, R., & Nguyen, N. (2019). Summaries from the 34th annual high tech tax institute. The Contemporary Tax Journal, 8(2), 6.