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Pricing Decisions EMBA 5411 Budgeting and Pricing
Pricing ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],/30
Profit Maximization ,[object Object],[object Object],[object Object],[object Object],[object Object],/30
/30 Quantity made  and sold per month Determining the Profit-Maximizing Price and Quantity Dollars per unit Demand Marginal revenue q* p* Marginal cost Profit is maximized where  marginal cost equals marginal revenue, resulting in price p* and quantity q*.
Determining the Profit-Maximizing Price and Quantity /30 Total revenue Dollars Total cost Total profit at the  profit-maximizing quantity and price, q* and p*. Quantity made  and sold per month q*
Price Elasticity /30 The impact of price changes on sales volume Demand is  elastic  if a price increase has a large negative impact on sales volume. Demand is  inelastic  if a price increase has little or no impact  on sales volume.
Who determines the price? ,[object Object],[object Object],[object Object],[object Object],/30
Influences on Price ,[object Object],[object Object],[object Object],[object Object],/30
Pricing approaches ,[object Object],[object Object],[object Object],[object Object],/30
Product Life Cycle /30 http://www.hss.caltech.edu/~mcafee/Classes/BEM106/PDF/ProductLifeCycle.pdf
Life Cycle Costing ,[object Object],[object Object],/30
/30
Cost-plus Pricing ,[object Object],[object Object],/30
Which cost? ,[object Object],[object Object],[object Object],[object Object],/30
Which costs? ,[object Object],[object Object],/30 Price= variable costs + markup %* variable costs
Which costs? ,[object Object],[object Object],/30 Price= unit manuf. cost + markup %* unit manufacturing cost
Which costs? ,[object Object],[object Object],/30 Price= unit cost + markup %* unit cost
Example - Pricing ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],/30
Cost Plus Pricing Versions /30
Cost Plus Pricing Versions /30
Time and Material Pricing ,[object Object],[object Object],[object Object],[object Object],[object Object],/30
Example /30
Time and Material Charges ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],/30 4% of material costs
Example con’t /30
Internal Pricing – Transfer pricing issue ,[object Object],[object Object],[object Object],[object Object],[object Object],/30
Effects of Transfer Prices  ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],/30
Ideal Transfer Pricing ,[object Object],[object Object],[object Object],/30
Transfer Pricing Methods ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],/30
Transfer Pricing Implementation ,[object Object],[object Object],[object Object],[object Object],/30
Transfer Pricing for International Taxation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],/30

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EMBA Pricing Decisions Guide on Cost-Plus Pricing, Transfer Pricing, and Time & Material Rates

  • 1. Pricing Decisions EMBA 5411 Budgeting and Pricing
  • 2.
  • 3.
  • 4. /30 Quantity made and sold per month Determining the Profit-Maximizing Price and Quantity Dollars per unit Demand Marginal revenue q* p* Marginal cost Profit is maximized where marginal cost equals marginal revenue, resulting in price p* and quantity q*.
  • 5. Determining the Profit-Maximizing Price and Quantity /30 Total revenue Dollars Total cost Total profit at the profit-maximizing quantity and price, q* and p*. Quantity made and sold per month q*
  • 6. Price Elasticity /30 The impact of price changes on sales volume Demand is elastic if a price increase has a large negative impact on sales volume. Demand is inelastic if a price increase has little or no impact on sales volume.
  • 7.
  • 8.
  • 9.
  • 10. Product Life Cycle /30 http://www.hss.caltech.edu/~mcafee/Classes/BEM106/PDF/ProductLifeCycle.pdf
  • 11.
  • 12. /30
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  • 16.
  • 17.
  • 18.
  • 19. Cost Plus Pricing Versions /30
  • 20. Cost Plus Pricing Versions /30
  • 21.
  • 23.
  • 25.
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  • 30.