Purchase Price & Special Ordering
Special order pricing is a procedure to calculate the lowest price of a product or service. This is the price at which a special order is accepted and below this, the order is rejected. It is a circumstantial issue. If the customer tends to lower the normal price then the market orientation that is a high sale or low sale will determine whether to accept or reject the offer. It happens that the incremental profits from the special order are greater than existing incremental costs.
Contribution approach is another term defining the sales, in which price is lower than normal still generates some sales a contribution per unit, to special order pricing.
Sometimes the customer will demand alterations to the price. It is usually a unique order not affecting regular sales. The company should complete the special order without any extensive efforts. In other words, it must have additional resources to complete the order. The common strategy applies to special order is as following
- If incremental incomes are less than incremental costs, it is better to reject the special order unless qualitative features are pronounced to do so.
- If incremental profits are greater than incremental costs, it is recommended to accept the special order unless some quality features hinder the decision.
- If incremental revenues are balancing the incremental costs, then it is better to put emphasis on quality features to execute the decision.
This complicated business issue can be made easy by making a special order pricing template via free customizable templates which highlight the incremental readings to take a prompt decision of acceptance or rejection.
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Special Order Pricing Template
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