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 Rate Of Return Pricing: |
|
Simple Illustration: |
Capital invested / employed $2,000,000 Target return 10% Estimated costs $500,000 Mark up = 10% x $2,000,000 $500,000 =40% |