Grade 8 pricing

Pricing and expense/Revenue Management

Price:  Price refers to the exchange value of goods and services expressed in terms of money. In other word, it is the value placed on what is exchanged. According to the seller, price is the only source of revenue. On the other hand, price is what one gives to get what one wants to the customer.

Pricing: Pricing refers to the amount that will receive by company for exchanging of goods and services. Pricing is done with covering total production cost, distribution cost and profit that one want to earn. Pricing should be in such way that one can earn higher profit as well as maintain good relationship with customer.

The task of pricing is extremely difficult because it is difficult to determine what price will be the best.

1.       If the price is very high, it is possible that customer will find it expensive and won't buy the goods.

2.       If the price is low, it is possible that customers will buy it, however it won't lead to any profit.

The major consideration in the process of pricing are:

Production cost

Customer's perceived value of the goods and services.

Margin of profit

Price of competitor that sell the same kind of goods and services.

How is price determined? Describe with the factors of price determination.

Price is determined by the state of demand. If the demand is high, the sellers comparatively charge the high price. On the other hand demand is low, price is also cheap.

The factors of price determination are as follow:

   1.       Production cost: it includes the cost of raw materials, labor, processing, production, distribution, and selling of the product.

   2.       Customer's: it is necessary to determine price that customer can perceive value of the goods and services 

   3.       Margin of profit: it is the profit that one wishes to gain by selling product.

   4.       Competitor: the price of competitor that sell the same kind of goods and services.

The measures to make the business profit oriented are:

1. good relationship with customer.

2. quality products

3. advertisement

4. co-operative staffs and members

5. attractive offer.

Revenue: Revenue refers to the income that a business receives from its various business related activities.
Expenses: Expenses refers to the cost that a business incurs to its various business related activities.

Trading Account: 
The account which is prepared to ascertain gross  profit or gross loss of a business is called trading account. All direct expenses are written on debit side and all direct income are written on credit side.
objectives:
1. To calculate gross profit or gross loss.
2. To provide information about direct expenses.
3. to facilitate in preparation of profit and loss account.
4. to provide information about the opening and closing balance.
       make a table of page no 77.

Profit and loss account: