Product Costing and Pricing in Small and Medium Enterprises in Tanzania

Abstract

This paper reports on a study that was conducted on twenty (20) metalwork small and medium enterprises located in Dar es Salaam with the aim of establishing methods used by SMEs in Tanzania in setting selling prices of their products. The study was necessitated by the apparent discrepancy of prices for similar products from SMEs. The approach used to gather information was mainly through direct interview and the use of questionnaires. Direct observation and literature review were also used to establish the whole costing and pricing practices in metal manufacturing SMEs. The findings of the study established that product selling practices of the surveyed SMEs were based on instinct and appearance of the buyer rather than using systematic approaches of establishing production costs and adding reasonable profit margins. It was further indicated that the product costing practices used by SMEs resulted in under-pricing or over- pricing of products, which subsequently led to unreliable markets for the products. Based on the findings of the study, a costing system was formulated aiming at assisting SMEs in setting prices for their products. However, further studies are needed to expand the information in the formulated costing system leading to a comprehensive costing system to cater for all activities of SMEs.