Friday, 7 April 2017

Cost of goods - Method of Determination

Cost Of Goods

Method of determination of the cost of goods  - The determination of the sale price, namely: cost approach (cost plus pricing, the pricing mark up, and fixing of the break even) as well as the approach to the market or competition, is:

1. Cost plus pricing (Cost-Plus Pricing Method)

This method is the selling price per unit is determined by calculating juml; ah whole cost per unit plus a certain amount to cover the desired profits, so the sale price of products that can be calculated by the formula:

Total Cost + Margin = Sales Price

2. The fixing of the selling price Mark-Up (Mark-Up Pricing Method)

The determination of the sale price based on with this almost the same marked up with cost plus pricing, because entrepreneurs more use of determination price of marl-ups. For merchants who buy merchandise will determine selling prices after adding to the purchase price with a mark-up, with the formulation:

The purchase price + Mark ups = selling price

The fixing of the selling price based on mark-up is the excess of the selling price on the price to purchase price. The advantages can be obtained from most mark ups. In addition the merchant should also produced a number of costs of exploitation are also taken from the partially marked up.
3. Determination of the price break even (Break even pricing)
Pricing based on market demand and still consider the cost in the determination of the price break even break even, in a State where the income received is equal to the cost, assuming that the price of selling certain already. This method will get the company's profits when sales reached is above the break even point.

Pricing method based on break even this can be applied by using the concept of a fee, as follows:

  1. Variable costs, are costs that vary caused by any change the number of results. When the amount of goods produced increases, then the costs will also increase from to.
  2. Fixed costs, are costs that do not change (a constant) for each level/number of results are produced, these fixed costs including salaries of the leadership, rent, tax and wealth.
  3. The total cost, is the entire cost that will be incurred by the company or the total cost of this was the sum of the variable costs and fixed costs. Total costs caused at each unit called the average total cost (average total cost) with formulation: Total cost = fixed costs + variable costs
  4. The total revenue is the amount of receipts which can be obtained from the sale of the company's products, which can be calculated by multiplying the number of results with the selling price per unit.

After the known costs and resulting in a number of concepts, and now a meeting point between the total cost by total revenue. This point is called point break even (break even point). To determine the point of the break even point could use formula:

Break Even Point in Unit = Fixed costs / Sales Price per Unit - variable Cost per unit

No comments:

Post a Comment