Pricing Flashcards
1
Q
Cost-based pricing
A
Price = Cost + Mark-up component
2
Q
Mark-up on cost base
A
= Target profit (before tax) + costs not in the cost base / Volume (units) * Cost (in terms of cost base) per unit
3
Q
Manufacturing cost base - pros and cons
A
Pro: covering all manufacturing cost & making a fair profit margin.
Con: Contain an allocation of fixed MOH.
4
Q
Cost bases
A
- Variable manufacturing overhead
- Variable cost
- Manufacturing cost
- Full cost
5
Q
Mark up components
A
- % of cost
- % of selling price
- % to achieve ROI (=Profit/Investment)
6
Q
Market-based/ Target pricing
A
Based on what customers want and competitors prices.
7
Q
Target Price
A
Estimated price for a product/service that potential customers will be willing to pay.
8
Q
Target cost
A
= Target price - Target profit margin
9
Q
Porter’s generic strategies
A
- Cost leadership
- Differentiation
- Focus (cost or differentiation)
