Explain what is break-even pricing method in Pricing Decisions ( Part 4
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
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Salient Points on Break-Even Pricing: |
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Simple Illustration: |
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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? Solution: Break-even price = Fixed Cost + Variable cost/marginal cost Total Number of units produced = $25,000+ $8,000 4,000 = $8.25 + mark up of 15% ($1.24) =$9.50 which is the selling price to the customer. |
Related Posts
- 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.
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