B price based on full cost freight volume or weight whichever is higher insurancec

COSTS INVOLVED IN EXPORT PRICE QUOTATIONS-SOME THOUGHTS

(i)                 Export price based on Marginal Costs: Following are the Direct or production costs which are invariably used for the computation of export price.      

                                         Determination of export price

1.Direct material       
2.Direct labour
3.Variable production overheads (for example special dies ad jigs)
4.Variable administrative overheads (for example, salary of export clerk) Other costs directly related to exports:
5.Selling costs – advising support to importers abroad
6.Special packing, labeling etc
7.Commission to overseas agent
8.Export credit insurance
9.Bank charges
10.Inland freight
11.Forwarding charges
12.Inland insurance
13.Port charges
14.Export duties, if any
15.Warehousing at port, if required
16.Documentation and incidentals
17.Interest on funds involved/cost of deferred credit
18.Cost of after sales service including free parts supply
19.Consular fees
20.Pre shipment inspection and loss on rejects

                Total direct Costs
Less: Duty drawback and benefits sale of import licenses of any
Direct cost net = F.O.B price at marginal cost (1)
Freight (Volume or weight whichever is higher)
Insurance
C.I.F price(based on marginal cost)

Export price based on full costs
Direct costs as in (1) above
Fixed costs/common costs
Production overheads
Administration overheads
Publicity and advertising (general)
Free on Board (F.O.B) price (based on full cost)
Freight (volume or weight whichever is higher)
Insurance

C.I.F price (based on full cost)

Measurement of the above cost sheet gives the lower limit for export pricing. As would be clear from the cost sheet all costs directly related to exports are taken into cannot for fixing the lower limit. If some incentives are allowed on the export of the product concerned, the lower limit would be further reduced by the amount of incentives. In the case of export houses purchasing their supplies from underneath manufacturers, the cost price of suppliers obtained would constitute the lower limit.

Steps involved in an Export price quotation                        

1. A precise description of the merchandise, packaging, quality and technical specification. (Illustrated product literature should accompany in case of plant and equipment and durable consumer goods ad sample on consumer goods)
2. Price including any rebates and discounts terms payments.
3. Price of delivery. I.e Cost, insurance and freight (C.I.F) price is quoted; breakdown of the same should be provided.
4. Minimum and the maximum quantities that could be supplied
5. Mode of shipment and the date delivery
6. Period for which the quotation is valid

It is always enviable to plan and prepare a cost sheet for every transaction on the above basis. This will ensure that the exporter does not overlook any items of cost quoting his price. A cost sheet can be also kept as enduring record about each business which could be of help in making future quotations.

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