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Unit 7 P1

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Submitted By yorisha
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14-11-2104
14-11-2104
yorisha sanstra
ROC Amstelland 297245 yorisha sanstra
ROC Amstelland 297245
Unit 7 finacial m
P1
Unit 7 finacial m
P1

A) Describe different methods an organization can use to calculate a cost price

Cost-plus pricing - Set the price at your production cost, including both cost of goods and fixed costs at your current volume, plus a certain profit margin. For example, your widgets cost €40 in raw materials and production costs, and at sales volume, your fixed costs come to €40 per unit. Your total cost is €80 per unit. You decide that you want to operate at a 20% markup, so you add €20 to the cost and come up with a price of $80 per unit. So long as you have your costs calculated correctly and have predicted your sales volume, you will always be prepared for any possible outcome and will always gain a profit. Fair pricing - Sometimes it simply doesn't matter what the value of the product is, even if you don't have any competition. There is simply a limit to what consumers perceive as "fair". If it's that your product cost €30 to make, even if it is only calculated €10,- in value, you'd have a hard time charging twenty or thirty euro’s for it. Your customers would just feel like they were being pay off. A little market research will help you determine the maximum price consumers are willing to pay Direct costs
Direct costs are cost that are directly linked to the product being made.
A manufacture has to buy raw material to make it into a finished product. Another direct cost is labor. By labor I mean the payment that the employees get when they produce the products. For example: A clothing company needs to sell 100 shirts. In order to sell this amount of shirts it need cotton and wood in a certain amount. The manufacture needs a budget to buy all this and it also needs to pay its staff. Example: for a 100 shirts is

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