Data Structure
Networking
RDBMS
Operating System
Java
MS Excel
iOS
HTML
CSS
Android
Python
C Programming
C++
C#
MongoDB
MySQL
Javascript
PHP
Pricing methods tell about the price determination of goods/services by considering all the other factors. Factors include competitions, product cycle, company visions etc.Pricing methods are divided into following −Cost oriented pricing method.Market oriented pricing method.Cost plus pricing − with the help of this cost plus pricing method companies will arrive at the selling price of goods and services. In this method, direct material cost, direct labor cost and overhead costs are added to markup percentage and determines product price.Markup pricing − In this method, some percentage of markup cost is added to the cost of product and selling price is ... Read More
It is a competitive pricing method, in which prices are decided based on quotation/estimated price or in sealed bids. This method is generally used in construction/contract business.In this, a tender notice is printed in the newspaper. Work proposals, type of job, quality, duration of project etc. are printed in the newspaper. In reply to the notice, interested parties send their sealed bid stating their price, particulars before deadline.On the due date, submitted sealed bids are opened and allocated to bid at a lower price with satisfaction conditions. Company sets the price based on how competitors' costs the product.AdvantagesThe advantages of ... Read More
In transfer pricing, the capital of one enterprise is used in another enterprise. That means management of one company can control another company. The main objectives are separate profits and performance is evaluated separately.Secondly, it affects allocations of company resources. In this method cost incurred in one enterprise can be utilized in another enterprise.The main purposes for transfer pricing are as follows −Direction of cash flows.Shifting profits.Minimize tax burden.Methods of transfer pricing are as follows −Comparable uncontrolled price method.Resale price method or resale minus method.Cost plus method.Arm's length principleEvery country has its own taxation rules. It states that the terms ... Read More
In the going rate-pricing method, price is determined on the basis of present rates prevailing in the market. Companies may set prices high or low depending on product/services to their competitor's prices.This method of pricing is useful for products/services which show fewer variations between producers. It is also called a competitive parity method. In this method, competitor's price is taken as base and price is set according to objectives, services offered and product quality.AdvantagesThe advantages of the going rate-pricing method are as follows −Competitor's price is taken as base.Uniform price in market.Misguiding customers is protected.DisadvantagesThe disadvantages of the going rate-pricing ... Read More
In target return pricing, price is determined based on the rate of return targeted on investment. Desired Return is also called Return on investment. This type of method is used in e-commerce.In this, selling price is determined with insights of the market department, other data and customers willing to pay. Now, targeted profit is deducted from the selling price and resulting amount tells about the limits of production cost.FormulaThe formula for target return pricing is as follows −TRP = UC + (DR*C)/USHere, TRP = Target-Return pricing, UC = unit cost, DR= Desired return, C = investedcapital, US = unit salesDR ... Read More
In the value pricing method, the price set is based on the value recognised by the customer. It is mainly a customer based pricing strategy, where price is not decided on cost of production.It is different from cost plus pricing. In cost plus pricing, price is determined based on product price. This type of method works for the companies, who are focusing on specific needs of customers. This strategy was useful for the products which are sold on customer sentiments or emotions.Value based strategy is used by various businesses to price their product/services. This strategy is based on the following ... Read More
In this competition based pricing method, the price is determined based on competition in the market. Price is determined by considering competition, price sensitivity and cost.Competitive pricing strategy is the strategy used by a company to fix the price of a product by keeping the view of competitors.This can be done in following ways −High price − By making modifications or adding extra features to the product, a higher price is set than its competitors.Low prices − Increasing volumes by maintaining the same product cost. By analysing the price structure of competitors with available resources and making necessary changes in ... Read More
In a demand based pricing method, the product price is determined by customer demand and product perceived value. In this, customer responses are considered and a suitable price is determined. Factors considered are manufacturing cost, location, market competition, quality etc.Some of the strategies are as followsPrice skimming − High price is set initially, to increase their value and then, the price is gradually decreased to increase their customer base.Price discrimination − Price is determined based on demand in market. Different markets/customers are charged differently for similar products.Value based pricing − Price determination is based on the actual value of the ... Read More
In Cost plus pricing method, a fixed percentage/profit margin is added to unit production cost which includes material cost, labour cost, overheads cost, manufacturing overheads etc. to get selling price.This type is more suitable, where there is no uniform production or each order is different.FormulaThe formula for cost plus pricing method is as follows −S.P. = PC (1+ PM)Here, S.P. = Selling price, PC = Unit production cost, PM = profit margin/fixed percentageAdvantagesThe advantages of cost plus pricing method are as follows −Simple to calculate.Increase in price can be justified.Price can be determined, if there is no market price.DisadvantagesThe disadvantages ... Read More
The term merger is nothing but combining the two or more companies to form a big unit and term acquisition is nothing but takeover of one company from another company. The main aim is to reduce operation costs, wealth maximizations. Mergers and acquisitions play an important role in the corporate finance world.Types of MergersMerges are classified into following types based on economic perspective and business combinations −Horizontal mergerVertical mergerConglomerate mergerMergers are also classified based on legal perspective into the following −Statutory mergerMerger of equalsShort form mergerSubsidiary mergerRightsBased on the percentage of shares held by the parent company, they will have ... Read More