Pricing Strategy - Relevant Costs and Incremental Breakeven Analysis

These flashcards cover key concepts and strategies related to pricing in business, specifically focusing on relevant costs and incremental breakeven analysis.

3 C’s of Pricing

Costs, Customers, Competition - the three key elements to consider in pricing strategies.

Cost-Based Pricing

Pricing method that adds a markup to the unit cost to determine the price.

Customer-Based Pricing

Pricing strategy that allows customers to dictate prices, based on their perceived value.

Pay-What-You-Want Pricing

Pricing model where customers pay an amount they choose for a product or service.

Sunk Cost

Costs that have already been incurred and cannot be recovered.

Incremental Costs

Costs that change as the price changes, typically related to variable costs.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted.

Fixed Costs

Costs that do not change with the level of output or production.

Breakeven Analysis

A calculation to determine the sales volume at which total revenues equal total costs.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in price.