The Quotations Meaning And Definition. (Cost Accounting)
Very often a producer in response to an advertisement of a tender in the press is required to quote prices for the supply of the commmodities he produces or for completing a job. A quotation has to be prepared very carefully as the receipts of orders depend upon the acceptance of quotations or tenders supplied by the manufacturers. The preparation of quotation requires information regarding prime cost, works, administration and selling overheads and profit of the preceding period. The manufacturer has to ascertain and find out the possible changes in prices of material, rates of wages and other costs. He has to ascertain the amount of variable, semi-variable and fixed overheads on the basis of past experience. he must also have a reasonable amount of profit by taking into consideration the market condition.
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In preparation of estimates, overheads are generally not given. They are estimated as percentage i.e., works overheads on wages and administration, selling and distribution overheads on works cost basis.