Wednesday, 14 October 2020

Pricing Decisions

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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 profitability and or increase the market share.


􀁺 When there is considerable unfilled 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 firm’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 markup or margin on the total variable costs (marginal cost).

Marginal Costing Technique: Marginal costing technique helps in determining the most profitable 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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