Price Analysis for the Navigation System Essay Example | Topics and Well Written Essays - 500 words

Price Analysis for the Navigation System - Essay Example For a cost to be said to be allowable, it has to be reasonable, allocable and comply with the terms of contract. The cost has to be reasonable in the sense that, the government buyers do not feel like they are being over-charged for the goods or services being offered by the company. The cost has also to lie within what the government would wish its citizens charged for the same (CCH Incorporated, 2007). Another type of cost to be determined is the variable cost which is a contrast of fixed cost. With the former, any variation in the expenses incurred will result in a corresponding increase in the output. However, with the former, the variation resulting from the incurred expenses does not affect the output. In the determination of the variable cost; that is after the completion of the start-up phase of a company, one has to bear in mind the costs relating to packaging, raw materials and the labour that is directly involved in the manufacturing process of the company. The total variable cost can be determined by getting the product of total cost per unit of output and total quantity of output. The semi-variable cost, which is also referred to as mixed cost, include both the variable and fixed rates. Electricity is considered to be the most common variable cost especially in the manufacturing companies. Cost analysis is very important to help one determine how to price a given commodity from a particular supplier. Before performing price analysis, there is need to compare competitive bids. This can be achieved through comparing several suppliers of a given similar commodity then at the end of the day, the average of the costs one has obtained can be very useful in helping him/her determine the price of a given good. Despite the fact that the above method is regarded as the best one when it comes to price analysis, there other methods which include prices set by law and regulation, comparison of a published price list,