3.2 Explain The Calculation Of Unit Costs And Make Pricing Decisions Using Relevant Information
3.2 explain the calculation of unit costs and make pricing decisions using relevant information
Pricing is depend on the unit costs, consumer capability and the breakeven analysis, To perform the breakeven analysis and to calculate the unit cost ,we should consider about the two relevant costs. Those are fixed costs and variable costs.
Fixed costs – Costs that will not change with in a period of time . ex- Machineries, Insurance. These are the essential costs that should be considered at the beginning of a sale.
Variable costs- Variable costs are the costs that will change rapidly in the production. ex- Electricity, Telephone bill.
A unit cost will include a unit’s fixed cost and a unit’s variable cost.and also it can be measured by dividing the total cost with the number of units that produced. This unit cost plays a major role in pricing process. With the unit cost only a product’s profit margin will be decided. …show more content…
of units produced Setting a price
To analyze the breakeven point and to measure the expected revenue pricing must be accurate and relevant. Before setting a price company should consider about customer’s power of borrowing, and their expectations. Cargills ceylon PLC is following a unique pricing strategy that targets all general public. It spends time to research the market and to know the psychology of the buyers or consumers.
The formula to calculate or conduct breakeven analysis is so simple. Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Costs)
This measurement will help us to know the number of units that need to sell to touch the breakeven point. Every additional product sold apart from breakeven point will maximize the profit by with the unit or product contribution
Pricing is depend on the unit costs, consumer capability and the breakeven analysis, To perform the breakeven analysis and to calculate the unit cost ,we should consider about the two relevant costs. Those are fixed costs and variable costs.
Fixed costs – Costs that will not change with in a period of time . ex- Machineries, Insurance. These are the essential costs that should be considered at the beginning of a sale.
Variable costs- Variable costs are the costs that will change rapidly in the production. ex- Electricity, Telephone bill.
A unit cost will include a unit’s fixed cost and a unit’s variable cost.and also it can be measured by dividing the total cost with the number of units that produced. This unit cost plays a major role in pricing process. With the unit cost only a product’s profit margin will be decided. …show more content…
of units produced Setting a price
To analyze the breakeven point and to measure the expected revenue pricing must be accurate and relevant. Before setting a price company should consider about customer’s power of borrowing, and their expectations. Cargills ceylon PLC is following a unique pricing strategy that targets all general public. It spends time to research the market and to know the psychology of the buyers or consumers.
The formula to calculate or conduct breakeven analysis is so simple. Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Costs)
This measurement will help us to know the number of units that need to sell to touch the breakeven point. Every additional product sold apart from breakeven point will maximize the profit by with the unit or product contribution