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This paper has two specific objectives: to appraise the relative importance of cost‐plus pricing and to develop and test hypotheses concerned with contingent factors that might affect the degree of importance attached to cost‐plus pricing.

Data were collected via a mailed survey of UK and Australian companies. Tests were applied and non‐response bias was not a threat to the validity of the findings.

A relatively high degree of importance attached to cost‐plus pricing is noted, although there appears to be a substantial number of companies that use cost‐plus pricing for a relatively small sub‐set of products and services. Companies confronted by high competition intensity attach relatively high degrees of importance to cost‐plus pricing and manufacturing companies attach a relatively low degree of importance to cost‐plus pricing.

The paper makes a contribution, given that only two empirical studies with a specific focus on cost‐plus pricing were revealed in a literature search covering the last two decades. Additionally, little has been done to investigate the contingent factors affecting the application of cost‐plus pricing. The significant role played by competition intensity in connection with accounting system design is observed to be one of the more enduring relationships uncovered by management accounting research. But a somewhat perplexing aspect of this study concerns the failure to find a statistically significant positive relationship between company size and cost‐plus pricing.

Empirical studies have found that cost-based pricing remains dominant in pricing practice and suggest that practice conflicts with marketing theory, which recommends value-based prices. However, empirical studies have yet to examine whether cost-plus formulas represent the pricing approach or essence.

This study aims to address the factors that explain price setting whereby the cost-plus formula is not just the pricing approach but also the pricing essence. This examination is grounded in a survey conducted on 380 Brazilian industrial companies.

The results show that, for price-makers, the cost-based pricing essence is positively associated with four factors (two obstacles to deploying value-based pricing, company size and differentiation), but it is negatively related to one factor (premium pricing strategy). For price-takers, the cost-based pricing essence is positively associated with four factors (two obstacles to deploying value-based pricing, coercive isomorphism and use of full costs), but it is negatively related to five factors (one obstacle to deploying value-based pricing, company size, competitors’ ability to copy, normative isomorphism and experience).

The key contribution of this paper is demonstrating that cost-plus formulas do not go against the incorporation of competitors and value information. This study reveals that it is possible to set prices based on either value or competitors’ prices while simultaneously preserving the simplicity of the cost-plus formulas. Via the margin, firms may connect costs to information about competition and value. The authors also demonstrate the drawbacks of not segregating companies into price-makers and price-takers and an excessive focus on the pricing approach at the expense of pricing essence.

While the gap between economic theory and companies’ practice, regarding to the pricing setting, has been extensively explored and explained, the new gap between the marketing normative view and companies’ practice needs further clarification. In this way, the paper aims to investigate whether marketing researchers’ claim that the use of cost-based price approach prevails over the use of value-based price approach is pertinent.

The paper is guided by the following research question: “Does price-setting based on cost plus margin go against the value-based price approach?” The answer to this question is grounded in reflections on results of previous research studies and in a case study conducted in an industrial company. Because of the qualitative focus of the present study, hypotheses are not established, but rather the following proposition: certain companies use the mechanics of cost plus margin in the sale price-setting process, but it does not necessarily mean that these companies set prices based on cost.

The arguments, propositions and the case study findings provide the logical sequence and the support required to conclude that price-setting based on cost plus margin does not always conflict with the value-based price approach. As a result, it may be claimed that the general proposition established is theoretically valid, i.e. using a price formula that contains the elements cost and margin does not necessarily mean that the company sets prices based on cost.

The key contribution of this paper is demonstrating that in certain business environments, such as, B2B, using the price formation mechanics based on cost plus margin is the way found by companies to enable the approach adopted. The approach may be cost-based or value-based price. This is the first study that explicitly reveals how B2B companies may set prices based on value while simultaneously preserving the simplicity of cost plus margin formulas. Researchers have significant misconceptions about these formulas: in previous studies, they classified all price-making companies as those adopting the cost-based price approach simply because they used formulas containing the element cost.

Preface The functions of business divide into several areas and the general focus of this book is on one of the most important although least understood of these—DISTRIBUTION. The particular focus is on reviewing current practice in distribution costing and on attempting to push the frontiers back a little by suggesting some new approaches to overcome previously defined shortcomings.

Explores suitable ways of modifying cost‐plus pricing policies in the context of marketing based theory. Reports the findings of a research project concerned with the procedures followed in the pricing of consumer durables, and attempts to formulate an alternative statement of pricing behaviour to the cost‐plus theory. Recounts that an empirical study was made among 17 firms in the industry, ranging from smaller organisations manufacturing relatively simple electrical heating apparatus to the industry's larger firms manufacturing washing machines, refrigerators and spin dryers. Summarises that it is hoped the marketing approach to pricing, outlined there and in the accompanying table, will assist in developing sound marketing theory.

Two companion articles have considered transfer pricing objectives and factors influencing the designing of these systems. This article, the last in the series, treats the topic of designing transfer pricing systems. Since many multinational firms have subsidiaries in the U.S., it is worthwhile to consider the U.S. Internal Revenue Service regulations regarding transfer pricing. Transfer pricing systems can be designed under a variety of alternative market scenarios. These topics are discussed in the first two sections of the article. The designing of profit‐oriented and cost‐oriented transfer pricing systems are considered in the next two sections. A mention of methods for selecting transfer pricing systems concludes the article.

Introduction Contemporary marketing thought stresses that pricing decisions ought to be made within the context of the firm's entire marketing mix. Price is but one facet of a company's appeal to consumers and needs to be fully integrated with the physical product, its package, advertising, promotion, distribution and so on, in such a way as to enable it to complement, support and enhance every other component of the marketing mix. This means, among other things, that prices should be determined by reference to the market, set at levels which consumers are able, willing or can be persuaded to pay. In addition, the price he pays for a product should reinforce the consumer's judgement of its image and quality. Just as, according to the marketing concept, it is the buyer rather than the manager who defines the product and, thereby, the firm's business, so the meaning and level of the price at which the product changes hands should be decided ultimately by the attitudes and behaviour of consumers.

An examination of the philosophy and methodology of transfer pricing is provided. The concept of transfer pricing is that, within a manufacturing company, one department, on transferring its output to another department, should regard this transfer as a sale and that there should be a definite policy on setting the selling price. The most usual methods of transfer pricing – cost, cost plus, market price and dual pricing, are evaluated and worked examples of transfer pricing implications in practice, included.

Aims to study the pricing decisions of small firms. Conventional wisdom argues that small firms tend to use relatively unsophisticated methods of pricing; however, indicates that small firms may in fact be a good deal more sophisticated in their techniques of pricing than has previously been supposed. Reviews the theory and empirical evidence to date and notes a significant gap in the research into small business pricing. Using a case study method based on 12 detailed cases of the pricing policies of small companies, concludes that there is little evidence to support the findings of previous studies which indicated the predominance of full‐cost pricing. It was found that small companies avoided “head‐on” competition and sought to exploit their own market niche as a means of exercising more control over their prices.

Transfer pricing stands at the heart of a MNE management control system. We review the theories of TCE and RBV and develop antecedents and consequences of transfer prices based on these theories. We propose viewing transfer pricing decisions through a TCE and RBV value chain framework. We review a sample of transfer pricing literature based on this theoretical perspective and show how it fits within our framework. Our framework suggests that setting transfer pricing policy is indeed a complex problem that includes many factors and has many consequences, some of which may be at odds with each other. We give some suggestions for future research based on this framework.