Business – 9.3 Operations strategy – Enterprise resource planning (ERP) | e-Consult
9.3 Operations strategy – Enterprise resource planning (ERP) (1 questions)
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Calculation:
- Direct material = £12
- Direct labour = £8
- Overhead = 2 hrs × £5 = £10
Total unit cost = £12 + £8 + £10 = £30.
Pricing influence:
- Knowing the exact cost allows the firm to set a price above £30 to achieve the desired profit margin.
- ERP cost data can be compared with competitor pricing to decide whether a cost‑lead or differentiation strategy is viable.
- Cost breakdown highlights high‑cost components (e.g., labour) where process improvements or supplier negotiations could reduce the unit cost, enabling more competitive pricing.