COMM 103 Chapter Notes - Chapter 12: Profit Margin, Psychological Pricing, Price Skimming

• School: Queen's University
• Department: Commerce
• Course: COMM 103
• Professor: Gary Bisonnette

Document Summary

An organization"s cost base is made up of the total cost associated with delivering the organization"s products or services to the marketplace. Costs(total cost base) are split into 2 types of costs: direct or variable costs(directly involved in the manufacturing process, indirect or fixed costs(operational support costs) Key questions: base: what are the direct or variable costs versus the percentage which are considered to be indirect (fixed or semi-fixed), are there cost areas that make up a significant percentage of our overall cost. Variable costs, also known direct costs, are directly tied to the manufacturing or delivery of a product or service: main sources of variable costs include: After identifying the cost base organizations now need to build an understanding of it. By understanding the cost base, an organization can determine the required pricing strategy which will be utilized in the marketing of a product and its corresponding impact on profit. Variable costs + fixed costs = total costs.