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Define Price Setting and Quotations

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The manufacturing concerns set the selling prices of their products at specific levels. Selling price of a product must be reasonable. If selling price is too high then due to competition from rivals, a firm's sales can be affected adversely. Similarly, if selling price is too low then a firm can go into loss. It is more advisable that a business concern should ascertain its cost and then add its profit into cost of sales. The cost data are helpful in setting prices of the products of a business concern.

A quotation is an offer to supply goods according to the terms and conditions of the purchasers. A quotation contains the price per unit of a specific product. A manufacturer or supplier shows the willingness to supply goods to a potential customer at specific prices in response to an inquiry. When this quotation is accepted by the inquirer then a binding contract is formed between the supplier and buyer. The cost data are used to prepare quotations. A supplier should quote those prices only which can give him some reasonable profit. For this purpose, a supplier should prepare cost statements before giving his quotations.

Wilfykil answered the question on April 15, 2019 at 09:40

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Define Price Setting and Quotations

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