In the earlier article, we have dealt with the importance of making the correct pricing decisions and the factors to consider before making a pricing decision.
This article refers to the various methods of pricing which include the following:
- Full Cost Plus pricing;
- Variable/Marginal Cost Plus pricing
- Rate of Return Pricing;
- Break-even Pricing;
- Minimum Pricing;
- Standard Cost Plus
Salient Points on Break-Even Pricing:
Fixed Cost $25,000
Variable cost $2.00 per unit
Number of Units produced 4,000
Mark-up is 15% on the break-even price
What will be selling price to the customers?
= Fixed Cost + Variable cost/marginal cost
Total Number of units produced
= $25,000+ $8,000
+ mark up of 15% ($1.24)
=$9.50 which is the selling price to the customer.
- Explain what is Marginal or Variable Cost Plus Pricing in Pricing Decisions ( Part 2 )
- Explain what is Full Cost Plus Pricing Method in Pricing Decisions ( Part 1 )
- Explain what is Minimim Pricing Method in Pricing Decisions( Part 5)
- Explain what is the Rate Of Return Pricing Method in Pricing Decisions ( Part 3)
- In Marginal costing, explain what is contribution accounting and the difference between contribution and net profit. Explain what is contribution, contribution costing,and contribution graph.