ABSTRACT
This chapter discusses the various elements of cost that are crucial in determining the selling price of a product. It aims to demonstrate the role played by these elements of cost in deciding the selling price of the product. In general, the four methods of product pricing are used: conference and comparison method, investment method, full cost method, and direct costing or contribution method. Cost estimation as well as profitability is necessary for determining the economic advantage of any business. The profitability and most efficient work output are two major requirements of accurate cost estimation. Profitability of a product is a function of the cost structure. The cost of sales staff salaries and commissions to dealers and warranty costs are collectively referred to as selling expenses. All expenses are divided into fixed and variable components and only the variable costs move with volume changes. As the fixed costs get prorated over the larger volumes, profits increase.
