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CVSOH BVSc3 > Professional studies - pricing > Flashcards

Professional studies - pricing Flashcards

1
Q

What are the 4 Ps of marketing?

A

Product
Place
Price
Promotion

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2
Q

What must the businesses turnover be for the business to be VAT registered?

A

Above £85,000

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3
Q

What is VAT? What does it cover?

A 
Tax for HMRC
Covers products (widgets) and services
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4
Q

What is the assumed rate of VAT?

A

20%
cost x 1.2 = VAT inclusive
VAT exclusive = VAT inclusive price/1.2

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5
Q

What is the name for a generic product in regard to VAT?

A

Widget

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6
Q

How will a practice buy and sell widgets?

A

Buy widget from supplier at VAT inclusive price
Claim VAT at end of accounting cycle
Charge client VAT when buying widget

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7
Q

What are products?

A

Tangible items which the practice selects and buys in for resale to clients
Eg. medicines, food, toys, vaccinations

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8
Q

What are services?

A

Personally delivered by vets and nurses

eg. consults, dentals, x-rays

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9
Q

How is price setting usually done?

A

Add mark-up to wholesaler price

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10
Q

Why is price setting important to the vet?

A

May need to justify/explain costs to client

Essential for vets to be able to understand and cost services accurately

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11
Q

What must practice pricing be?

A

Cover all practice costs
Fair and ethical
Suitable profit
Enable future practice growth

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12
Q

What do veterinary bills get spent on by the vet practice?

A

VAT
Salaries of vets, vet nurses, receptionists and support staff
Building, lighting, heating etc
Cost of drugs/ stock items

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13
Q

What is the true cost of medicines?

A 
Cost of meds used during the year plus:
Direct staff costs
Equipment costs
Consumable costs
Damaged/wasted stock
Practice overheads
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14
Q

How do you work out the mark-up?

A

(Selling – Cost)/ Cost x 100

A percentage of the cost price added to the cost price to give the selling price

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15
Q

How do you work out the profit margin?

A

(Profit/ Selling) x 100

The profit expressed as a percentage of the selling price

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16
Q

What is the sales price equal to?

A

= wholesaler price + delivery charge + direct labour + direct materials + direct equipment costs + overheads + profit

17
Q

What are shopped items?

A

When owners shop around for specific items in order to compare prices - competition between companies

18
Q

What does the principal of shopped items give rise to?

A

Loyalty schemes

19
Q

What is the professional fee equal to?

A

= Direct Labour + Materials + Equipment costs + Overheads + Profit
Labour is the largest component

20
Q

What are the two ways of calculating fees for services?

A

Cost based methods

Profit centres

21
Q

How do you work out the labour cost per hour?

A

Annual vet or nurse cost / number of chargeable hours per year

22
Q

What are the average chargeable hours of a vet?

A

50%

23
Q

What are direct material costs?

A

The consumables used in the provision of the service eg. sedation, syringes

24
Q

What are direct equipment costs?

A

From the fixed asset register - annual maintenance, insurance, consumables, depreciation

25
Q

What are overheads?

A

Do not include payroll but include all non-labour costs (Fixed/variable)

26
Q

What are the total FTE hours for vets, vet nurses, vet assistant?

A

Vet - 1
Vet assistant - 0.9
Vet nurse - 0.5

27
Q

What are profit centres as a way of calculating fees?

A

Where the practice is split into different areas and the total running costs of each area are calculated
Must know how many procedures are carried out in each centre during the year

28
Q

What are some examples of profit centres?

A 
Surgical suite
Anaesthesia
Consulting
X-ray
Procedures
Dentistry
Lab
29
Q

What are the main profit centre costs?

A

Direct labour
Direct materials - cost of consumables used
Direct equipment costs

30
Q

What are the 3 common pricing strategies?

A

Cost pricing
Value pricing
Competitor pricing

31
Q

What is value pricing?

A

Bases price on what the market is prepared to pay

32
Q

What is competitor pricing?

A

Bases price on what the competitors are charging for shopped items

33
Q

What are some issues with veterinary pricing?

A

Vet services are complex
No national benchmarks
Continuous competition with other practices
Individual work rates differ

34
Q

What is the break even analysis?

A

Tool to determine at what point a product/service/company will be profitable
Anything you sell beyond the break-even point will add profit

35
Q

What are the benefits of break even analysis?

A 
Smarter pricing
Cover fixed/variable costs
Catch missing expenses
Set revenue targets
Smarter business decisions
Limit financial strain
36
Q

What are the drawbacks of break even analysis?

A

Unable to predict demand
Ignores time and competitors
Dependent on reliable data

37
Q

What are the 4 common scenarios when the break even analysis is helpful?

A

Starting a new business
Creating/providing a new service/product
Adding a new sales channel
Changing the business model

38
Q

What is the break even analysis formula?

A

Break-even point = fixed costs/(average price - variable costs)
Basically fixed costs divided by net profit per unit sold

39
Q

What are the 3 steps for break even analysis?

A

Collect costs
Plug data into formula
Make adjustments

CVSOH BVSc3 (60 decks)

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