Marketing Assignments

Chapter 18 – Pricing Setting in the Business World

There are few Methods for setting pricing – costs methods vs demand methods

Formulas considering costs and mark up will help you to do the Problem set assignment:

1. Markup for setting prices (Mark up $ = SP-CP); MARK UP % = (MU $/SP) X100)

Formula for setting price with the markup method

SP = Cost/(1- Markup %)

Example - retailer buys A hat for $15 and wants a 40% markup, his selling price would be….

SP = 15/(1-.40)=.60

= $25.00

2. Understand Role of different costs – fixed, variable, total costs and average costs

3. What is the breakeven point? Formula for calculating the Break Even point.

BE = Total Fixed Cost/Fixed cost contribution

Fixed Cost Contribution=Price – variable cost

4. Average Cost = when there are many flavors/types of the same product, producer determines average cost and then add the mark up to set a common selling price.