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Strategic Managerial Accounting – A Primer for the IT Professional by Gopal Saxena

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CHAPTER 2

Nature of Costs

Start with the end in mind.

—Stephen R. Covey (The 7 Habits of Highly Effective People)

Case Study

True Informatics (TI) is a medium-sized software development. It noticed that, of late, some of its quotes to clients were sometimes quite off the mark—either much lower or much higher than competition, the higher ones usually occurring toward the end of the financial year. They also found that once they had met or were close to their annual sales target they tended to be out priced by their competitors. Quotes were prepared by estimating number and type of development resources required, converting individual salaries to an hourly rate and then adding a flat 50 percent to cover the overheads such as rent, utilities, administrative ...

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