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Price Assessment of Metal Castings

The price assessment of metal castings is based on the cost of sales, and the expected profit, sales taxes and selling expenses should also be considered.

The formula is: the metal castings sale price = sales cost + expected profit + sales tax + selling expenses. To determine the expected profits, many factors should be considered, and its change rates are relatively large. To sum up, the main factors considered to determine the expected profits are as followed.

1. Market factors: including the industry average profit level, market competitive conditions, etc. In a buyer's market conditions, price is ultimately determined by the market. Therefore, the final price is achieved in the market competition balance. So the price out of market is not rational.

2. Castings features: including the main technical content, casting materials, quantities and so on. In the casting market with little technical difficulty, large quantities, versatile materials, and the competition is usually more intense and casting expected profits can not be too high. On the country, castings with large technical difficulty, long development cycle or small quantities and uncommon materials, the expected profits may be higher.

3. Settlement method: The main thing to be considered is recovery period. The process of production and operation is actually the capital flows and value-added process, the capital input becomes products through production process and then through sales process to get back investment, in this way, a cycle of funding is finished. In such a cycle, the capital is value-added, and the enterprises gain profits. The shorter this period is, the faster the cash flows and the more profits are accumulated. Taking into account of operating costs of capital, time value of fund and capital value added, the impact of loan payback period on profits can not be ignored.

4. Capacity utilization: to determine the need to consider the expected profit is an important factor in the company's production capacity utilization, if the foundry has spare capacity underutilized actually is a waste of resources. In this case, you can expect lower profit margins, zero or even negative. A negative expected profit not necessarily will increase losses. As long as the direct costs, taxes, cost of sales are removed, the rest can share some of the management fee, and we can increase the total profits of enterprises by providing margin contribution, which is the concept of profit margin in the management accounting. Conversely, if the production capacity is insufficient, some of the casting counted routinely is not loss, if its profit margin is not high, and it consumes more resources, it actually reduces high-margin production capacity of castings, such opportunity loss can be regarded as the cost of the product, which in management accounting is called opportunity cost. In this case, you need to raise expected profits and optimize product structure.

If the cost of metal castings is clear, the price assessment of metal castings is becoming easy. The price assessment of castings is divided into pre-assessment and post assessment. The purpose of pre-assessment is to offer, and post assessment aims to make profit and loss analysis. There is an unknown factor when we do pre-assessment, and according to the statistical analysis of historical data we can estimate the standard cost; while the costs of post assessment are known, it can be divided according to specific products, and the allocation of costs should be consistent with the actual situation.

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