Assignment 2: Price Analysis for the Navigation System
Professor Stephen Bartorillo
BUS 315: Cost and Price Analysis
July 26, 2015
Analyze your company’s cost classification for pricing of the navigation system. Defend your cost classification to the US government.
Considering that our only competitor in the field of navigation systems is VectorCal, it was important for us to carefully determine pricing that was, not only competitive enough to beat the competition, but affordable enough to increase customer demand. Our Analysts have worked diligently in reviewing the cost to manufacture our product from all different angles and scenarios in order to create a price ...view middle of the document...
Determine reasonable, allowable, allocable, variable, fixed & semi-variable costs for your company after the initial startup phase is complete.
Now that the initial startup phase of our company is complete, our team of Analysts has determined what we have deemed reasonable costs, considering that our definition of “reasonable” aligns with yours. In order to defend our stance on what we feel is reasonable, we have considered the nature of costs, such as air travel for business meetings and the use of our high quality materials, by researching the market for affordable, high-quality materials and have put standards in place to keep air travel valid for these government contracts. With the understanding that although the nature of the cost may be considered acceptable, the amount of the cost may not meet standards when it comes to costs defined as “reasonable” (Murphy, John Edward; Guide to Contract Pricing, pg. 47). With this in mind, we continue to research the market to find adequate material at a much lower cost. We have used this data to create what we feel is a cost that would not and should not exceed what any prudent person would pay in a competitive business environment. We are aware of the competition and have made it a strong incentive of ours to save on costs for the items that we are providing to you. Allowability of our costs is guided by the 52 generally applicable cost principles that are based on specific laws and policies (Murphy, John Edward; Guide to Contract Pricing, pg. 49). Our administrative team includes contract officers that decide the allowability of each particular cost and ultimately work closely with cognizant administrative contracting officers and auditors in making sound cost principle judgments. When it comes to allocable costs, we feel that this contract effort makes sense for the government to pay because the costs incurred for these systems are the best in the business and have been carefully analyzed to make this contract worth paying for. Like all variable costs, our variable cost pattern fluctuates according to the total volume of work that we do. If volume drops then variable costs are low and if volume increases then the...