Costing and Pricing
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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
0
