Costing and Pricing ´ ´ Cost and Strategy Cost price is the total amount of money that it costs a manufacturer to produce a given product or provide a given service .A cost price includes all outlays that are required for production, including property costs, materials, power, research and development, testing, worker wages, and anything else that must be paid for. The manufacturer must calculate a product’s cost price carefully to avoid taking a loss on sales or not being profitable enough. Scrupulous accounting and careful deliberations are required to set subsequent prices realistically. A sum for contingency may also be included in the cost price, given the difficulty of ensuring that all costs are accounted for. Cost For some companies, the total costs of making a product are listed under the cost of goods sold, which is the total of the direct costs involved in the production. These costs might include direct materials, such as raw materials, and direct labor for the manufacturing plant. On the other hand, a retail store might include a portion of the building's operating expenses and the sales associate's salary in their costs. For the items sold through the company's website rather than the physical store, the expenses of designing and operating the website might be included in the costs. Price The appropriate price of a product or service is based on supply and demand. The two opposing forces are always trying to achieve an equilibrium where the quantity of the goods or services provided matches the demand of the corresponding market and its ability to acquire the good or service. The concept allows for price adjustments as market conditions change. Supply is the number of products or services the market can provide, including tangible goods, such as automobiles, or intangible goods, such as the ability to make an appointment with a skilled service provider. In each instance, supply is finite—there are only a certain number of automobiles and appointments available at any given time. Demand is the market’s desire for the item, tangible or intangible. The number of potential consumers available is always finite as well. Demand may fluctuate depending on a variety of factors, such as an item's perceived value, or affordability, by the consumer market. Cost price is often considered sensitive information that the manufacturer wants to protect from both customers and competitors. Strategies to set the "price" Pricing to capture the highest level in the market is a strategy in which a high price is set for a product new in order to obtain maximum income, layer by layer, of the segments that are located to pay that high price; the The company sells less, but with a higher profit margin. ✓ The image and the quality of the product must support this price high. ✓ You must have a sufficient number of specific buyers to purchase the product for that price. ✓ Production costs of smaller volume without limitations being so high that they eliminate the advantage of charging more. ✓ It should not be so easy for competitors to penetrate the market and sell the product cheaper. EXAMPLE Cost • manufacturing cost $ 50 MX • packging $ 20 MX Price • Logistic operation international $ 30 MX FINAL PRICE $ 130.00 MX Profit • $ 30 MX
