The Role of Accountant in Pricing Strategy Formulation

The Role of Accountant in Pricing Strategy Formulation

Project / Seminar Material
Reference ID: PS-15-TM

DEDICATION

This research material titled “The Role of Accountant in Pricing Strategy Formulation” is dedicated to God for his enabling grace, and to all computer enthusiasts who contributed to make life a pleasant experience during my research documentation.

ACKNOWLEDGEMENT

I extend my sincere gratitude to all those who contributed to the completion of this project. Special thanks to my Supervisor (Name of your Supervisor), the Head of Department (Name of your HOD), the Lecturers in the department of Accountancy / Accounting, Book Authors and Profound Scholars of existing or related project material on “The Role of Accountant in Pricing Strategy Formulation” for their invaluable guidance, support, and expertise throughout the journey.

I am also grateful to your study area (mention any funding organizations, if applicable) for their financial assistance. This research would not have been possible without the encouragement and assistance of some stakeholders (mention any mentors, teachers, or colleagues). Additionally, I would like to acknowledge the understanding and patience of my family and friends during this endeavor. Your unwavering support has been a constant source of motivation. Thank you all for being part of this meaningful endeavor.

The Role of Accountant in Pricing Strategy Formulation

TABLE OF CONTENTS

PRELIMINARY PAGES

CHAPTER ONE

  • 1.0 Introduction
  • 1.1 Statement of the problems
  • 1.2 Purpose of the study
  • 1.3 Objective of the study
  • 1.4 Scope of the study
  • 1.5 Assumptions of the study
  • 1.6 Limitations of the Study
  • 1.7 Definition of terms

CHAPTER TWO

  • 2.0 Literature Review
  • 2.1 Historical Background of Research Problem
  • 2.2 Theories and models relevant to the research
  • 2.3 Current literature based on variables of the Models
  • 2.4 Summary of the Chapter

CHAPTER THREE

  • 3.0 Summary, conclusion and recommendation
  • 3.1 Summary
  • 3.2 Conclusion
  • 3.3 Recommendation
  • 3.4 Areas for further study

BIBLIOGRAPHY

ABSTRACT

In any flourishing business today, pricing has been their key function. This is so because the rate with which modern business is growing coupled with the worldwide inflationary trends, more dimensions will be added to the problem of pricing. In any market economy where goods and services are traded, pricing is very crucial as the prime mover of traded, for instance, pricing ration out scarce good. This is a rise in price of good indicates that the good is in relative short supply. Pricing can be used to discourage unnecessary pressure on some commodities, this is price serving as a mater or gauge. Price indicate the direction of want and also pricing as a means by which factors of product are awarded and as a result, many professionals in business are beginning to play major roles in pricing decision and pricing strategy formulation. The objective of this research is to investigate whether accountants have any contribution in pricing strategy formulation with particular reference to selected manufacturing firm in Onitsha. The problems staring the business world in face which the researcher has taken upon, herself to provide answers are:

  • Is pricing strategy formulation a management problem?
  • Does accountants have any role to play in pricing strategy formulation, if yes to what extent?
  • What measure can the accountant adopt in solving the problem of pricing strategy formulation since if poses across department problem.

The depth of the study is to find out answer to the above questions.

In conclusion, Since pricing strategy formulation poses inter-department problem on whose right is to take pricing decision, it was shown that accounts are important in resolution of the problem of pricing strategy formulation, in a decision making process involving consideration of company law, taxation labour agreements and trades regulation in business operations, therefore the accounts need not to be confined to financial information contained in ledger accounts only.

The Role of Accountant in Pricing Strategy Formulation

CHAPTER ONE

1.0 Introduction

Pricing is one of the elements of the marketing mix in any market economy, where goods and services are traded, price is the watchword. It is one variable that is crucial to both seller and buyer.
According to Kalu (1995:138) any commodity that has the capacity to satisfy human wants is said to possess utility. The power of such utility or of the goods possessing if to command other goods in the normal or regular exchange is its value.

According to Clarke (1981:79) price sellers views pricing as the incredible three-headed monster, he went further to say that each one is independent of the other. One of the heads is concerned with marketing and views pricing as a tool for gaining entrance to the market improving market penetration and positioning product in the market.

The second head is that of the accountant who thinks solely of the units cost and contributions. This head has a fine eye for design and calculates cost for each component of every product. While the accountant sees himself as the custodian of profit and in ever suspicions of price cutting measures of marketing. He believes that salesmen lack courage and so need to become firm if profit margins are not to be crowded.

The third-head according to him is that of micro economist. He is sometime referred to as price theorist who is devoted to the study of the determinants and dynamic of price under various market structures. He is mostly concerned with demand and supply curves and theoretical models.

In practice however, the heads ignored him completely, his literature has an air of unreality more akin to academic than to the pressing affairs of business life. The first two heads does not understand the pressured words marketing and accounting and his approach is too theoretical to be for practical use.

1.1 Statement Of The Problem

The problem of this study is to investigate on the role accountants play in pricing strategy formulation in selected firms in Anambra State. Beside, this work focused on finding whether the accountants plays a vital role in pricing strategy formulation or not and if yes, to what extent is he directly involved.

According to Thompson (1981:13), Pricing strategy can be thoughts as an interconnected web of actions, decision and plans, which are formulated and pursued by all levels of management, hierarchy in order to attain a justifiable selling price per unit of output provided by a firm.

It is glaringly clear that pricing strategy formulation poses a cross-departmental problem and is not in the background of this study.

The accountant is important in resolution, is a decision problem and the accountant being involved in production relevant information for decision making has a major role to play in pricing decision. He is concern with application of his professional skill and relevant information available to him to help the management to formulate an acceptable pricing strategy, which does not, over role all objectives of the firm.

1.2 Purpose Of The Study

The purpose of this study is of three fold

  1. The study seeks to examine the role accountants play in pricing strategy formulation as this poses a cross department problem.
  2. The study seeks to examine how accountants would fashion their accounting system in terms of allocating cost with a view to obtain a valid pricing decision.
  3. Finally, a deficiencies or what you mean in the system will be revealed and we shall recommend measured that the problem of pricing should adopt in solving the pricing strategy formulation bearing in mind the effects of other economic and environment variables.

1.3 Objective Of The Study

The objective of this study is to research on the role accountants plays in pricing strategy formulation, whether they plays a vital role in pricing strategy formulation or not and if yes, to what extent is he directly involved.

  1. To use the application of his professional skill and relevant information available to him to help the management to formulate an acceptable pricing strategy.
  2. Knowing the proper way of determining price setting.To impact upon the organizations customers in terms of satisfaction, product performance and meeting individual and societal wants.
  3. Having the basic method of arriving at prices is being adjusted to meet certain market condition and bearing in mind the factors that affect prices of products.

1.4 Scope Of The Study

This research project covers only on some selected firms in Anambra state. Though this does not represent a good estimates of manufacturing firms but the choice has been necessitated by the location of the firm therefore, this project is only limited to the role of accountants in pricing strategy formulation.

1.5 Assumptions Of The Study

The following assumptions were made for the purposes of this study.

Skimmer S.J. (1996:59) that information needed for pricing discussion is being provided by the Accountant.

According to Baker (1984:157) that there are only two broad strategy approaches to price which are:

  • Skinning Approach
  • Penetration Approach

According to Kotler (1980):389) actual setting should be based on three factors cost namely.

  • Demand-Oriented Pricing
  • Cost Oriented pricing
  • Competition-Oriented pricing

According to Hagen, D.C. (1974:104) that before setting price, the decision makers considered the reaction of the following.

  • Distribution
  • Suppliers
  • Competitors
  • Government
  • Company Executives.

According to Kotler (1980:46) that pricing strategy formulation revolves round the following.

  • Organizational competence and resources.
  • Personal values and aspiration.
  • Environmental threats.
  • Societal obligation and ethical consideration.
  • Product market opportunities.

1.6 Limitations Of The Study

There are many constraints to be the completion of this research work but for the purpose of this study, the following factors should be considered.

The major factor that constraints the extent of the study carried out on this project work is time factor.

1.7 Definition Of Terms

Accounting: The world accounting in this project means the financial or management accountant who is involved in decision making and who is assumed to be the top management level.

Competitive Market: One could say the market is a competitive one if it has the following characteristics as was defined in economics. The product of one seller must be identical in the opinion of the purchases to the product of other sellers.Market participants whether buyers or sellers cannot influence individually, the market price of the product by their actions.

Economic Order Quantity (EOQ): This is the quantity of inventory at the point where inventory ordering cost and caring cost is at minimum.

Firm: A firm is used synonymous with company throughout the whole of this project.

Locality: The locality here refers to Onitsha and its environment.
Price Setters: This is referred to those who take pricing decision in a company.

Penetration: This is an approach that is based on the assumption that if you can produce a similar product to your competitors then you will take away some or his entire market share.

Selling Price: This is referred as the setting or unit product of a company. It is different from cost per unit of input used in production process.

Skimming: This is recognition that in almost all markets, there is hard core of demand for whom the product is question has a particular importance.

…

CHAPTER TWO

2.0 Literature Review

2.1 Introduction

This chapter focuses on the review of related literature. A literature review includes the current knowledge as well as theoretical and methodological contributions to a particular topic. It documents the state of the art with respect to the topic you are writing. It surveys the literature in the topic selected. In this research work the literature review includes the …

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