Tenders and quotations.A tender is an invitation to bid for a project

A tender is an invitation to bid for a project. Tendering usually refers to the process whereby governments and financial institutions invite bids for large projects that must be submitted within a finite deadline. The word tender can also refer to the acceptance of a formal offer, such as a takeover bid. This form of tendering is the process whereby shareholders submit their shares or securities in response to a takeover offer.

1. Tenders : A tender is an offer or bid made by a company to supply goods or services at a specific price within a set period. It is generally submitted in response to an official request, such as from a government body or large corporation, to meet their needs. Tenders are part of a competitive bidding process, where multiple suppliers are invited to submit their bids, and the buyer selects the best offer based on price, quality, and other factors.

2. Quotation : A quotation is a formal statement provided by a supplier, detailing the cost of specific goods or services, often in response to an inquiry. Quotations give potential buyers a clear idea of the expected expenses for the products or services and are typically used for smaller or non-competitive transactions.

3. Process for Tender/Quotation Need for Pricing : Management needs to quote prices in advance or submit tenders for goods. Preparation of Estimated Cost Sheet : To submit a tender or quotation, an estimated cost sheet must be prepared. This sheet provides the anticipated cost of manufacturing the product. Cost Estimation : The cost sheet includes: Direct Materials Direct Wages Overheads (predetermined based on historical costs). Future price levels and current conditions are also considered.

4. 4. Absorption of Overheads : Overheads are absorbed using a suitable method, such as: Percentage of Direct Materials Percentage of Direct Wages Machine Hour Rate 5. Final Output : The estimated cost sheet is used to determine the price for the tender or quotation submission. This ensures the management provides an accurate and competitive offer based on careful analysis and prediction of costs.

5. Calculation of Profit . After the total cost has been estimated, a desired percentage of profit is added to arrive at the price to be quoted. Such profit may be given as a percentage of cost or percentage of selling price. In order to calculate the amount of profit, it is easy to assume that figure as 100 on which profit percentage is given and then calculate the amount of profit.

6. PRICE QUOTATIONS OR TENDERS AND ESTIMATED COST SHEET Quite often the management has to quote prices of its products in advance or has to submit tenders for goods to be supplied. For this purpose an estimated cost sheet has to be prepared. Such an estimated cost sheet is prepared to show the estimated cost of products to be manufactured. In this cost sheet, cost of direct materials, direct wages and various types of overheads are pre-determined on the basis of past costs after taking into account the present conditions and also the anticipated changes in the future price level. Overheads are absorbed on the basis of a suitable method of absorption like percentage of direct materials, or wages or machine hour rate, etc. These methods were discussed in the overhead chapter. Calculation of Profit. After the total cost has been estimated, a desired percentage of profit is added to arrive at the price to be quoted. Such profit may be given as a percentage of cost or percentage of selling price. In order to calculate the amount of profit, it is easy to assume that figure as 100 on which profit percentage is given and then calculate the amount of profit.