Archive of Journal - Financing

Financing – scientific journal for economy

ISSUE 2019, No. 3, Article 3, Year of publication: 10, September, 2019

Cost based pricing concept adequacy in contemporary business conditions


Predrag Gajić, PhD*

*PhD, Associate Professor, University of Banja Luka, The Faculty of Economics, Department for Accounting and Business Finance



The success of the traditional enterprise, which has functioned in the conditions of limited competition and limited supply diversification, was based on volume of available resources and its efficient use, where the primary goal of the pricing policy was to cover the costs incurred during that process. On the other hand, changed business conditions have led to that the efficient use of resources is not sufficient, because operating results are primarily based on the effectiveness of its use and on the way on which the offer will be differentiated compared to a competitors offer. Furthermore, the sales profit-ability has to be built on satisfaction and loyalty of the customers, which clearly classifies the problem of cost covering, among company’s internal tasks.From the economic point of view, it is logical that the accounting (mathematical) evidences exist that the goals of pricing policy, regarding costs, are still met, i.e. it is necessary to be able to claim with certainty that the chosen price enables enough revenues to cover incurred costs.From the accounting point of view, traditional concept of pricing, with the cost-plus methodology, assumes that with the sales prices costs are covered. Costs have to be correctly identified by the individual cost object, which would enable correct base to which appropriate yield would be added. Contem-porary concept of pricing, based on target prices and defined based on the prevailing market prices or on estimated values of the product or a service that is offered to customers, requires from the accounting function to identify allowed (target) costs. To the extent that an individual company or even the whole industry will be under the influence of changes in the assets structure, that will be shifted from material toward immaterial resources, and to the extent in which they will be exposed to the competition, with the general trend in that sense already vis-ible, pricing concept based on costs will diminish in its significance. Still, this kind of conclusion does not reduce the obligation to ensure reimbursement of the value of spent resources in the process of production and sales of products and services, with the pricing policy. If this goal could not be achieved, the company will not have economic confirmation to continue the business activity. This way, the cost based pricing concept has not been denied, espe-cially not the accounting support in use of this concept, but the need of adjusting to business environment changes has been taken into account. The fact is that competitive positioning has to be done based on the content of the offerings and product or service characteristics and not based on their price.

Keywords: sales prices, cost based pricing model, market based pricing model, value based pricing model, pricing policy

DOI: DOI: 10.7251/FIN1903029G

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