Financial Management of a Small Handicraft Business (Oxfam, 1988, 43 p.): II. Pricing: (introduction...)

Financial Management of a Small Handicraft Business (Oxfam, 1988, 43 p.)

Acknowledgements

Introduction

I. Cost calculations in the handicraft industry

(introduction...)

I. 1. Production costs

I.2. Overhead apportionment

I.3. Selling and distribution costs

I.4. Ways to reduce costs

II. Pricing

(introduction...)

II. 1. Value in the market

II.2. Costs and pricing

II.3. Contribution analysis

III. The concept of working capital

III.1. Defining working capital

III.2. The role of working capital

III.3. Performance measurement

III.4. Profits

IV. Financial planning and decision making

IV. 1. Management Accounting

IV.2. Planning for working capital requirements

IV.3. Releasing cash from other assets

IV.4. Working capital decisions

Conclusion

A manual of credit & savings for the poor of developing countries

(introduction...)

If costing is a fairly precise science, pricing is much less so. This is because the price obtainable for a product is that which the market is prepared to pay. It is of absolutely no use to complain to a customer that a product costs a certain amount to produce, if the customer perceives its value as less than that, and is not prepared to pay more.

This is not to devalue the costing exercise, which is a fundamental requirement for a production unit, and its relationship to pricing will be looked at. Nevertheless, it is necessary to separate the concept of cost from that of value. Price will ultimately be governed by the value of the product, not its cost. Where cost exceeds value, profitable selling cannot take place.