ABSTRACT
Central
Cost And Pricing Analysis
William Ayine Adongo
University
For Development Studies
Department
Of Statistics(Option: Actuarial Science)
ID.FAS/0912/06
Email:ayinewilliam@yahoo.com
This paper presents a study of central prediction theory in economics. The study is based upon using the costs relationships and sales
relationships when one variable(output
or price) may assumed to influence
several total costs and several sales respectively.
1.0
Introduction
This paper presents two main topic.
That are the central cost-volume relationships and the central price-volume
relationships. These two main topics are to be briefly explained fundamentally.
1.1
Central Cost Model
This is a technique I have developed
for the estimation of mean total costs c1m, c2m ,.., cj,
…, cr provided the mean output q0m of mean cost c1m is known. The
model is:
C1m=α+β0qom
C2m=α+β0q0m+β1c1m
………………………………………………………
Cjm=α+β0q0m+β1c1m+…+βj-1c(j-1)m+…+βr-1c(r-1)m
………………………………………………………
Crm=α+β0q0m+β1c1m+…….+βjcjm+………+βrcrm
The table below shows the
cost-volume relationships of multi-production firm of tatal cots 1, 2,and3.
Output of c1 (q0)
5000
1000
2000
3000
5000
|
Total cost (c1)
115
151
205
212
328
|
Total cost (c2)
105
150
190
205
300
|
Total cost (c3)
151
150
204
208
308
|
We can estimate c1m, c2m, and c3m if q0m
is given. To estimate, we have:
β0=0.0316
β1=- 0.0604
β2=0.0747
α =101.1
NOTE: the parameters α ,and β0 , and β1, β2 are denoted as central fixed cost, central-coefficients of mean-output q0m ,and total costs c2m, c3m espectively.
NOTE: the parameters α ,and β0 , and β1, β2 are denoted as central fixed cost, central-coefficients of mean-output q0m ,and total costs c2m, c3m espectively.
Hence, the model is given as:
C1m=101.1+0.0316q0m
C2m=101.1+0.0316q0m-0.0604c1m
C3m=101.1+0.0316q0m-0.0604c1m+0.0747c2m
This is telling us that if
the mean output q0m of mean-total cost c1m is 3200, then:
C1m=202.2
C2m=190.0
C3m=204.2
1.2
Central Pricing Model
This is also a technique I
have developed for the estimation of the mean-sales s1m, s2m, …, sjm, …, srm
,provided the price p0m
of mean sales s1m is
known. The model is:
S1m=α
- β0p0m
S2m
=α - β0p0m - β1s1m
……………………………………………………………
Sjm=
α - β0p0m - β1s1m- … - β(j-1)s(j-1)m
- … - β(r-1)s(r-1)m
……………………………………………………………
Srm=
α - β0p0m - β1s1m-……..-βjsjm-……..-βrsrm
In this model, the elasticity of s1m is estimated as:
E=β0p0m/s1m
REFERENCE
*Galton, Francis.(1886). 'Regression Towards Mediocrity in Hereditary Stature'. Volume 15.
REFERENCE
*Galton, Francis.(1886). 'Regression Towards Mediocrity in Hereditary Stature'. Volume 15.
