Question

What is a reasonable price formula?

Answer 1

Reasonable price :

It is that price where both the parties to the contract are agreed upon and also price is set at that level where both the producer and the seller are satisfied at this price and is said to be fair price. the amount is determined as per agreed by the parties and also contract are made with no compromise in the quality of the product and performance of the contract in time make confidence among the parties and future contract is also based upon the present situation.

Under the government contracting a fair and reasonable price is that which follow the statutory and regulatory limitations .

When two or more offers are acceptable and out of which lowest price is selected and it should be considered as fair and reasonable price . It is to be observed that if the price difference between the two parties on a particular price is less than 15% than it is analysis that price competition is set to exist .

For settlement of the price various review , analysis or examination of the price are to be made and proper assessment and evaluation is necessary and the proposed price must be fair for both the parties by considering the quality of a product , delivery of the product and other factors .

In order to obtain the fair price cost analysis must be done at regular interval and observed that variable cost in the short run must be cover up otherwise company suffer losses if the price not covered the variable cost . Due to the fact that these are the cost for day to day expenses .

The basic formula for growth at a reasonable price ( GARP ) is the price earning growth ratio the ratio is computed by dividing the current market price to the earning growth rate in other word it is the ratio divide by the companies current price earning ratio by the earning growth rate . this formula is design to measure the balance between the growth and valuation .