1) Fixing price through Marginal Costing :- Marginal Costing technique can be used to fix the price as to a) Earn Maximum

m Contribution: Marginal Costing Techniques such as Profit Volume Ratio are especially helpful in fixing the selling price for submitting quotations or tenders. b) At Least Break-even. i.e. earn just enough to cover the costs. Thus if the product is perishable or seasonal, it is advisable to at least break even, i.e. sell on no profit no loss basis. The technique of Break-even Charts is useful in deciding the break-even point. It assists in deciding the minimum quantity to be sold or the minimum price to be charged in order to break even.

c) Recover At Least the Marginal Costs (or even in exceptional cases, less than marginal cost), e.g. in the following circumstances Depression: When there is trade depression, the concern must survive somehow. Even if the production is stopped, the fixed costs will continue. Hence it is better to continue the production so as to retain the trained labour, staff and the customers. The plant will also remain in working condition. This will avoid the costs of closing down and restarting again when the trade conditions improve. Eliminate Competition: When the concern wants to eliminate competition, it may initially sell at the Marginal Cost or even lower. Thereafter, once the competition is eliminated, it will enjoy monopoly, can charge higher prices and recover its losses. Establish New Product: When the concern wants to introduce or popularize a new product, initially, it may sell at the Marginal Cost. Once the product is established, it can increase its prices and recover its losses. The same strategy can be applied in case of a special order, or for an export order etc. Other Circumstances: When goods are of perishable nature ; When the prices of raw materials, which were over-stocked earlier, are falling rapidly; to avoid Shut-down costs; to push up sale of another highly profitable product; to capture new/foreign market and so on.

2) Marginal Costing: - The supreme goal of every management is to maximize profits. To achieve this goal, management has to take several decisions regarding the Marginal Unit, the Product-Mix, the Pricing, Making or Buying an Article and so on. It has also to ascertain the costs that are controllable and establish a system to actually control them.

Marginal Costing is an effective technique applied by the management in taking several policy decisions such as pricing, product mix, special offers, discontinue a product, optimum level of production, cost control and so on. The aim of every such decision is to maximize profits in the short run as well the long run. It also helps in Profit Planning. Marginal Costing enables the management to study different scenarios (cost and revenue situations) under various alternatives. The management can plan its short-term as well as long term profits. 3) Cost Control and Cost Reduction: a) Cost Control: Cost Control is defined as the guidance and regulation, by executive action of the costs of operating an undertaking. Cost control is achieved by setting targets of performance, collecting actual cost for each area of responsibility, comparing actual cost with targets and submitting prompt reports to top management showing deviations from targets. Cost Control involves (i) establishing norms.(ii) comparison of actual with norms, and (iii) corrective measures. b) Cost Reduction: Cost reduction may be defined as the achievement of real and permanent reduction in the cost of goods manufactured or services rendered without impairing their suitability for the use intended or diminution in the quality of the product. Cost reduction involves (i) Analysis of all activities (ii) identifying whether an activity is vital, secondary or unnecessary. (iii) Developing Solutions.(iv) Selecting a Solution; and (v) Obtaining agreement of management, employees and customers for implementing the solution. c) Use of Marginal Costing: Marginal Costing deals with Variable Costs which are easier to control. Fixed Costs arise in relation to time and hence are not controllable in the short run. Thus, once the rent of the factory premises is fixed by agreement, the management has no control over it. The variable Costs, on the other hand, are the direct costs of material, labour and expenses which are amenable to control. Flexible Budgets help the management in controlling the marginal costs. Break-even Charts and PV Ratios also help the management in controlling cost and maximizing the profits.

4) Optimal Choice in Pricing Decision:- Pricing Decision may be based on mainly three considerations such as : -Percentage of profit on total cost. -Percentage of profit on selling price. -Return on Investment. a) Profit on Cost: The profit percentage on total cost may not be advisable as the total cost includes certain estimation of overheads, inefficiencies in the cost structure and other approximations. Further, the market conditions and competitiveness will not be taken care of in this method. b) Profit on Sales: Similarly, the profit percentage on selling price also suffers from the limitations of market conditions, competitiveness and difficulty of price fixation in case of multiple products. In addition of these limitations, the overall profit may not be adequate to provide the desired return on investment by management. c) Return on Investment: Out of the various methods of pricing, this is considered to be the best method of pricing because the investment takes care of all the aspects of net fixed assets and net working capital employed for earning the profit. Hence the return on investment is a best measure for fixation of selling prices.

5) Key Factor: Every businessman aims to produce and sell unlimited units of the product manufactured by him. But there is always a factor which may limit the level of activity. Such a factor is known as Key Factor. In most cases, Sales is the key factor. It determines how much should be produced. There may also be some other factor such as raw material supply, availability of skilled labour, machine hours and so on. When sale is the key factor, the profitability of the product is determined by the Profit Volume Ratio. If any such resources such as Labour, Machinery, Raw materials or Finance in short supply, the contribution in relation to the Key Factor can be worked out by the following formula: Profitability per Unit of Key Factor = Contribution Key Factor The Product which yields the Highest Contribution per Unit of the scarce factor (Contribution per Labour Hour etc.) can be produced in large quantities to derive the maximum profits possible. Key factor(s) also helps to decide the optimum level of Production/sales, etc.