Price Analysis Essay Example | Topics and Well Written Essays - 500 words

Price Analysis - Essay Example The basis of certain agreed conditions such as the quality and the time taken to perform the contract determines the price. Some government contracting characteristics affect fair and competitive pricing. The characteristics are usually statutory and regulatory limitations. Decision to contract: This entails determination of need. Fulfillment of the standard of competition must be achieved when the contractor can conclude that the submission of the proposal adhered to expectation of competition. In order to predict the expected price of an acquisition we consider two components, the Purchase consideration and other costs directly associated with the acquisition (Drury, 2008). Purchase consideration includes assets exchanged, liabilities assumed, and Shares issued. Other costs include accounting fees, consultancy fees and legal fees incurred. Direct costs are production costs that can be directly identified and assigned to the final product. Indirect costs are general expenditures incurred for various or shared projects, activities and thus cannot be specifically identified with the final product. Direct costs can be allocated on the usage basis, time basis, effort basis, square footage basis and clients served allocation basis (Drury, 2008). Indirect costs maybe identified as fixed costs, and their allocation is usually easy. This includes salaries and wages allocation to managers and other personnel not directly engaged in the production process. Rent and office supplies are charged to each department. In this department, machines and other fixed assets undergo depreciation. Cost analysis is the examination of distinct elements e.g., labor that constitute a contractors total cost proposal or the price to determine if they are appropriate (Murphy, 2009). Whenever one is, comparing lump sum prices the use of the cost and price analysis becomes essential.