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Lecture

Chapter 7 Study Guide

2 Pages
92 Views

Department
Management (MGT)
Course Code
MGTA02H3
Professor
Chris Bovaird

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CHAPTER 7
Pricing: deciding what the company will receive in exchange for its product
Pricing objectives: goals that producers hope to attain in pricing products for sale
Market share: a companys percentage of the total market sales for a specific
product
Whatever the companys objectives, managers must measure the potential impact
before deciding on final price
Cost-oriented pricing: considers the firms desire to make a profit and takes into
account the need to cover production costs
Markup percentage = markup / sales price
Variable costs: costs that change with number of G/S produced or sold
Fixed costs: costs unaffected by the number of G/S produced or sold
Break even analysis: an assessment of how many units must be sold at a given
price before the company begins to make a profit
Break-even point: the number of units that must be sold at given price before the
company covers all of its variable and fixed costs
Break-even point (in units): total fixed costs / (price variable costs)
Zero profitability at the break-even point can also be seen using the following profit
equation:
Profit = total revenue (total fixed costs + total variable costs)
Pricing strategy: pricing as a planning activity that affects the marketing mix
Pricing tactics: ways in which managers implement the firms pricing strategy
Prices of a product can be set either in comparison to the prevailing market price as:
Above (play on belief that higher price = higher quality)
Below (provide acceptable quality while keeping costs low)
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Description
CHAPTER 7 Pricing: deciding what the company will receive in exchange for its product Pricing objectives: goals that producers hope to attain in pricing products for sale Market share: a companys percentage of the total market sales for a specific product Whatever the companys objectives, managers must measure the potential impact before deciding on final price Cost-oriented pricing: considers the firms desire to make a profit and takes into account the need to cover production costs Markup percentage = markup sales price Variable costs: costs that change with number of GS produced or sold Fixed costs: costs unaffected by the number of GS produced or sold Break even analysis: an assessment of how many units must be sold at a given price before the company begins to make a profit Br
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