Module 1 Pricing Strategy

Scenario

You are working for a large manufacturing company and need to provide feedback on various pricing options based on information you have learned during your time in the organization. You have the below information to get started:

1. Using the four cost based pricing strategies, what would the expected per unit pricing to be in each case?

Cost-plus Method

Variable total cost = $23,750

Fixed total cost = $35,450

Expected production = 125 units

Mark-up percentage = 15%

Mark-up Pricing Method

Variable total cost = $23,750

Fixed total cost = $35,450

Expected production = 125 units

Margin dollars needed = $125 per unit

Break-even Pricing Method

Variable total cost = $23,750

Fixed total cost = $35,450

Expected production = 125 units

Desired profit = $50.00

Target-profit Pricing Method

Variable cost = $23,750

Fixed total cost = $35,450

Expected production = 125 units

Return on investment required = 10%

2. Which of the four cost based pricing strategies would be the best option for the organization, and why?

3. Describe and discuss three factors that can impact price, and the potential impact it may have on your decision in question 2.