Minimum price decisions
You'll learn how to calculate the minimum price for one-off jobs using relevant costing principles. This video walks you through identifying which costs actually matter for pricing decisions—distinguishing between incremental costs, opportunity costs, and sunk costs that should be ignored.
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In this lesson
- 0:00 Minimum price decisions in one-off jobs
- 0:29 Baucus case study setup and draft quote
- 1:34 Material A: identifying relevant replacement cost
- 3:59 Material B: salvage value and purchase decisions
- 4:36 Skilled labour: spare capacity versus opportunity cost
- 5:26 Unskilled labour and agency staff costs
- 5:40 Overheads and mark-up: why they're not relevant
- 6:03 Calculating the final relevant cost quote
About this lesson
Using a worked example, you'll see how to handle materials from inventory, labour capacity constraints, and why overheads and mark-ups don't belong in minimum price calculations. This technique is essential for Performance Management and decision-making questions where you need to quote competitively without underpricing.
Duration: 7m
Transcript
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