Pricing

Cost Plus - add a % profit to costs If you want to make 20% profit on costs of $80 then 80/0.8 = 100 Calld Full Cost Pricing. it could be added as amark up to Total Manufacturing (Direct ((Prime)) Costs) or even on Variable Costs. Another method os to calculate costs then add on an amount to cover the cost of capital. So if T/o is $6m and there is 30% ROCE then 6/30% divided by the 195,000 production units = $9 per box

Target Pricing means determine what the customer is willing to pay. Determine a profit margin and create a product for a defined cost.

Price Setters - High MES, Dominant firms, cartels Price takers - perfect competition

Optimal Pricing - work out at what level of volume contribution is at its highest

Price penetraion - Sell cheaply and gain market share - Low cost producer Price skimming - Higher price especially new product, Network externalities, dominant firm - Short term

Inelastic prices - oil example US oil price up 60% Demand up 6% Elastic prices - very price sensitive - Bread Milk etc

Life cycle costing - realization that you will have to charge different prices during the lige cycle of the product

Special Pricing - Short term pricing - Only using relevant costs or contribution costs

Kaizen costing - breaking the costs in to small increments and reducing them

Benchmarking - What do your competitors charge?