By EasyHow

How to calculate selling price

The problem of determining the price realization is one of the most challenging to date for any enterprise. The strike price is the price at which you sell your goods/products/services. It depends on many factors: market conditions and average prices of the same goods from cost and production costs, the purchasing power of the target group, the number of competitors and the chosen competitive strategy. So how do you calculate price realization?

Instruction

Calculate an initial sale price by the formula:
TSR = (S + P +A)+ VAT
Where
TSR – selling price
– Unit cost of products/goods
P – planned /desired level of profit (profitability)
A – the excise duty (if any)
VAT – added tax stoiomst
Decide on the level of income and profits you wish to obtain over the planning period. Make sure sales can provide you this level.

Determine the break-even point, i.e. the volume of sales at which there is neither loss nor profit. This is necessary in order to understand, below what level of implementation you can't fall. The break-even point = Total fixed costs/(price - variable costs per unit of output).

Get to know the market. Find out the volume of product sales your group. Find out the prices for similar goods, works and services from your competitors. Find out what products are substitutes for the product that you produce. Conduct market research of the expectations of customers.

Compare the original (desired) selling price which you have by calculating with the prices of your competitors or with the level of expectations of customers.

Adjust the initial sale price. Develop and install system of discounts. Set different prices for different sales volumes. Build a graphical model. For this purpose, according to the x-axis show price on the y-axis is the sales volumes. Build curves of supply and demand, on the basis of previously collected data for marketing research (demand curve) and their own expectations (the supply curve). Thus, you learn the optimum sales price for your market.

Useful advice

If the cost per unit of output at your enterprise is structured into fixed and variable costs you can calculate the price of realization on the level of variable costs. This may be necessary if aggressive policy of entering the market, with the market introduction of new products. In this case you neglect fixed costs, it does not affect the final result, i.e. not relevant.