Slide3_2010Fall_MGMT324

Fixed costs fc costs startup overhead variable

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Fixed costs (FC) Costs Startup Overhead Variable production costs (VC) Economies of scale : VC decreases with number of units produced Economies of scope : Cost interrelationship Other useful cost concepts Opportunity cost Sunk cost Economies of experience : VC decreases with accumulated number of units produced
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Price = Unit cost + Mark-up (or Margin) The Cost-Plus Pricing Delusion Where Unit cost = (FC+VC)/(# of Units produced) Historically most popular (particularly for startup companies) Why delusion? Price # of Units sold # of Units produced Unit cost Often leads to Overpricing in weak markets Underpricing in strong markets
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What’s wrong with ? Example: Calvin’s Pricing
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Umbrella Branding Company Fit Example What if Bengay adds Aspirin to its product line? : : Other examples Use of the same brand name and identity for multiple related products
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Things to Do Submit “Advertising Yourself” Be ready to enjoy Labor day Due: Sep. 3 (this Friday) 11:59PM Be ready to welcome and
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