PRICING RELATED CALCULATIONS
COMM 224 –DR. K. BUYUKKURT
A)
COSTPLUS PRICING (MARKUP PRICING)
Costplus, also called markup pricing, involves simply adding a standard markup to the
unit cost of the product. The markup is usually defined as a percentage of the price. In
such cases,
)
1
(
_
MARKUP
COST
UNIT
PRICE

=
.
Assume that the total unit cost of your product is $16, and you want to determine your price
such that you will have a markup (profit) of 20 percent. So, what should your price be?
20
$
)
2
.
0
1
(
16
$
=

=
PRICE
Sometimes you may need to compute the unit cost for your product by taking into account
your total fixed costs and variable cost per unit. See Slide 10 of Class Notes for Chapter 11
for an example.
C) BREAKEVEN VOLUME:
By definition, at break even total revenue (TR) equals total cost (TC). That is
TR = TC
We also know that total cost is simply the sum of total fixed cost (TFC) and total variable
cost (TVC). So,
TR = TFC + TVC= TFC + (VC x Q)
Where VC is variable cost per unit and Q is the total volume (number of units that are
produced and sold).
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 Fall '10
 michael
 TFC

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