The Basics of Costing & Pricing Limpopo Provincial Treasury Procurement Seminar
11
The Basics of Costing & Pricing Limpopo Provincial Treasury Procurement Seminar Thursday 12 th August 2010 By: Allan Govender
-
Upload
kinipela-aidan -
Category
Documents
-
view
24 -
download
1
description
The Basics of Costing & Pricing Limpopo Provincial Treasury Procurement Seminar Thursday 12 th August 2010 By: Allan Govender. Overview. The Trading Cycle Brief explanation of the concept of Costing Brief explanation of the concept of Pricing - PowerPoint PPT Presentation
Transcript of The Basics of Costing & Pricing Limpopo Provincial Treasury Procurement Seminar
The Basics of Costing & Pricing
Limpopo Provincial Treasury Procurement Seminar Thursday 12th August 2010
By: Allan Govender
Overview
•The Trading Cycle•Brief explanation of the concept of Costing•Brief explanation of the concept of Pricing•Cost differentiation and its’ effect on pricing•Internal & external factors that impact on pricing decisions
The Trade Cycle
BUY GOODS SELL GOODS
“Profit Funds the Trading Cycle
COST YOUR GOODS
•Costing
•Pricing
ADD VALUE
E.G.
•Pro
ducing products
•Repackaging
•Bra
nding process
Costing
•Involves taking into account all the activities/processes that enable one to offer a product or a service.
Fixed Costs(costs that remain unchanged with
varying sales)
Variable Costs(costs that vary with sales)
Rent Raw materials
Insurance Packaging
Salaries Electricity/Water
Advertising Delivery Costs
Costing•Different businesses involve different activities/processes, therefore
costing is done differently.
Business Type Description Examples Fixed Costs Variable Costs
Manufacturing “You are making something from raw materials”
•Candles•Bakery•Furniture
•Rent•Insurance•Salaries
Raw materials
Packaging
Electricity
Service “You are selling your skills, talents, or expertise.”
•Hairdresser•Electrician•Painter
•Rent•Insurance•Salaries
???
Retail “You are buying products, and reselling to the public”
•Spaza shop•Grocery store•Clothing store
•Rent•Insurance•Salaries
???
FIXED COST + VARIABLE COST = TOTAL COST
Pricing
•Is the process of allocating a Rand Value to the product/service you
are selling.
R
PROFITOVERHEADSCOST PRICE
PRICE
=R 18.99
Manufacturing
Pricing cont…•The difference here is that you are selling your expertise MEASURED
IN TIME. You are selling the know-how as well as how long it takes.
PROFITOVERHEADSYOUR COST
PRICE
=R 18.99
Service
Pricing cont…
•Calculation of your cost in the Service Industry.•Determine Total Monthly Overheads.•Determine HOURS SOLD.•Calculate COST PRICE per hour
COST PRICE/HRMONTHLY
OVERHEADS
=÷No. of workdays p.m.
X
No. of hours p.d.
HOURS SOLD
Rands/ hour
Internal/External Factors Affecting Pricing
•Competition•Costs•Supply and demand•Image•The type of product/service•Unique products•New technology•Product positioning association•Environmental factors•Price doesn’t matter•Survival
Golden Rules of Pricing
•Who is your Customer?•What can he/she afford?•What is your customer prepared to pay?•What is your competition doing?•Is your product/service different?•What is the quality of your service?•What are your profit expectations?
THANK YOU
Contact Details
Seda WATERBERG
Desimale Building
98 Nelson Mandela Street
Modimolle
Tel: 014 717 1564
Fax: 014 717 3266
E-mail: [email protected]
