Monday, 18 November 2019

Unit 13: Pricing Decisions


                                                        Unit 13: Pricing Decisions   

Pricing which is part of the overall marketing strategy plays a very critical role in the success of a company as it is able to increase the profi tability and or increase the market share.

When there is considerable unfi lled capacity it may be necessary to accept a lower contribution in order to provide work in the factory.

The important pricing objective is to exploit the fi rm’s competitive position in the market place.

Before determining prices certain important factors should be taken care of.

The various methods of pricing include the following: Full cost pricing; Variable/Marginal Cost Plus pricing; Rate of Return Pricing; Break-even Pricing; Minimum Pricing, etc.

Marginal Cost Pricing: Under marginal Cost pricing, selling price is determined by adding a mark up or margin on the total variable costs (marginal cost).

Marginal Costing Technique: Marginal costing technique helps in determining the most profi table relationship between costs, prices and volume of business.

Transfer Prices: Transfer prices are the amounts charged by one segment of an organization for a product or service that it supplies to another segment of the same organization.

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