Financial Accounting

[Name of the Instructor]

Financial Accounting

The three areas that will be focused to increase the profitability of Joseph's Classic Market includes: pricing of the products, budgeting and keeping social cost in mind. The pricing decisions are influenced by three key players that are customers, competitors and cost of the product. Pricing decisions need to be taken in short run and long-term pricing decisions. In the short run firms need to adjust their product prices by keeping mind the changes happening in the competitive markets. The managers in order to evaluate an accurate product cost for making effective decisions need to use activity based costing of the product. This will also enable managers to have a proper evaluation of cost so that they can identify the impact of value re-engineering of adding a process, removing or changing the process. Firms in order to achieve target profits or maintain profitability need to use market based pricing method that has an impact on pricing according to the changes in the market and competitors behavior. The firms in order to set a price also needs to take into consideration the product cost which analyzes that a certain change or investment in a product will have what impact on the profitability of the firm. Managers need to identify or set the price of the product by keeping in mind the target profit of the firm's profitability. A value re-engineering method helps mangers in reducing the cost of the product so that firms target profit is achieved and also the customer satisfaction in a product is maintained. This method will help a lot in increasing the profit of the firm.

The second measure to increase profitability is through budgeting. Budgeting is guiding tools that help managers in analyzing the performance that either the firm is able to achieve results as per the expectations or not. Budgeting aids in planning operations motivate mangers to achieve their goals, have a control over the activities, evaluation of the firm's and manager's performance. Budgeting is a comparison of expectations with achieved results, any discrepancy between them make mangers aware of the lacking's in the firm's performance. Managers by making small budgets for each of their targets like sales budget, cost budget, finance budget, purchase budget help in finding out where the discrepancy exists in the whole process of the organization. Managers by making budgets on regular basis are able to predict a better budget every time and by overcoming the discrepancies it enables them in either increasing or enhancing the profitability of the firm.

The third area of the firm's interest is to keep into consideration the social cost that is attached with organizations operating in a society. These provisions of social cost add a lot of value to the company's social and economic benefits that exceed the profit of the firm. This new way of doing the business will create a new market for the firm and it will provide a competitive advantage to the firm's products been sold in the ...