Pricing Strategies and Break-Even Analysis

Determining Price

Factors include cost of business and desired profit.

Markup

Amount added to cost to cover expenses and profit.

Markup Percentage

Calculated as (markup ÷ cost) x 100.

Margin

Percentage of selling price not used for costs.

Margin Calculation

Selling price minus cost equals margin.

Profit

Money left after all expenses are paid.

Break-Even Analysis

Determines sales needed to cover costs.

Variable Cost

Costs that change with quantity sold.

Fixed Costs

Costs that remain constant regardless of sales.

Gross Profit

Selling price minus variable costs.

Break-Even Point (BEP)

Calculated as fixed costs ÷ gross profit.

Economies of Scale

Lower production cost per item with increased output.

Pricing Strategy

Plan to price products for marketing objectives.

Market Skimming

High initial price to recover costs quickly.

Penetration Pricing

Low initial price to attract customers.

Competitive Pricing

Prices match competitors to maintain market share.

Benchmark Price

Standard price set by market leaders.

Tariffs

Taxes on imported goods to protect local industries.

Most Favoured-Nation Tariff

Lower tariffs between Canada and trading partners.

Preferential Tariff Rates

Negotiated lower rates for key trading partners.

General Tariff Rate

Standard rate applied to non-preferred countries.

Transportation Costs

Expenses incurred for moving goods.

Currency Values

Exchange rates affect international pricing.

Landed Cost

Total cost including tariffs and shipping.

Purchasing Power Parity

Price equality across countries over time.

Marketing Plan - Pricing

Guiding questions for setting product prices.