Question

Completely and thoroughly explain how total product costing could be used in grocery store to determine how set prices for the items they sell so that those items include all of their costs such as labor, shipping costs, utilities and shelf space in the grocery store and the grocery store earns a reasonable and acceptable profit.

Answer 1

Total cost is the cost of direct material, labor, overheads, selling and distribution expenses, shipping cost etc. For pricing the single product, all cost should be taken into consideration. Company does not want to charge more or not less than the worth of product. Company cannot be out of the market by pricing so cheap or costly. Company has to make the ethical and actual pricing strategy for the product.

For determining per product cost you should add all the cost that incurred in making the product for a particular period of time and divide the total by number of products manufactured in that period to know the each product cost.

A grocery company should consider all the cost, cost of warehouse in which stock is kept, cost of maintaining the product on shelf, utilities, all should be considered for pricing the product so that grocery store may earn a reasonable profit.