what is backward pricing.

[Former Member]

Dear Gurus,

What is backward pricing in SD? When we use this senario? Can u please provide some links regarding this..

Regards

Jyothi.

[Former Member · Accepted solution]

Hi,

Normal Pricing is basic pricediscountssurchargeVATexcise etc..

Backward Pricing

Here the customer price is inclusive of every thing.Each and every component will be derived from the customer price.

Sccenario:

In cement industry the backward pricing is used.

Customer price = Rs4000/ton--this includes the basic priceVATexcise

Then first you have to derive the first component VAT for ex 12.5%

x+.125(x)=100

1.125x=100

x=100/1.125=88.89% of the customer price and the remaining 11.11% is VAT in this way u will arrive for the VAT and the remainig amount.

Then the excise is calculated on the basis of MRP(different cond type) of the material.

For ex 5000 is the MRP then excise will be based on Rs-5000

Then this value will be calculated and it has to be subtracted from the 88.89% value then the remaining amount what you r geeting is your basic price of the material.

Regards,

Gopal.

[Former Member]

Hi

Backward Pricing is when when the final customer Selling Price is fixed and the VAT and Excise calculations are builds into it.( So this scenario as per me will work in manufacturing companies eg cement industry )

For Eg: Say Custome Price( SP ) is Rs 100. and VAT % is 12.5% So Rs 100/112.5= Rs 88.89( Basic Price )

Vat Amount = Rs 12.5% *88.89= Rs 11.11

Regards

Rohit