Pricing Structure- ABC Costing System - Case Study Example

This strategy was mainly tied to distribution division and supply chain of the company and as the company noticed the profit of the firm declined they arose a serious business issue. The main issue here is that the company found out that there was problem in the cost listed in the clients account and hence it directed discrepancy in the accounting of distribution division which needed immediate attention. The current pricing structure employed by the company is competitive pricing structure. The competitive pricing structure is a phenomenon where the price of the product of the company is set keeping in mind the price set by industry competitors.

In this kind of pricing structure the focus is on the attributes of the product, its quality and company’s customer service. In this case study, it can found that the “Formula Plus” service is imposed taking in to consideration the competitive potential of the company’s product. Calculating the cost of the transaction driver with the help of ordering and receiving material cost and number of purchase order.Ordering and receiving material cost obtained from page 4 where total of the costs of the Distribution division were mentioned.

The number of purchase order was obtained from the page 6 where average total stock obtained was mentioned to be 350,000 boxes. In a company, the inventory or stock refers to the material the company holds currently in the premises in order to sell on a future date. Basically, the inventories of a company are associated with certain costs. These cost related to obsolescence of the inventory, the capital invested in the inventory, the cost of the space used and cost of monitoring the inventory.

Inventory financing basically means the company get financing with the help of a secured loan from bank. The capital charge for a business is usually calculated by multiplying gross income by the denoted beta assigned to the business venture. Since Les Papeteries