MGMA01H3 Chapter : Two Factors Affecting Price (s)
Document Summary
Two factors affecting price: the cost of doing a business, the profit a company hopes to make. Profit: money left over once all expenses are paid. Gross profit: selling price minus the variable cost. Also known as contribution margin because its money that contributes to the paying of fixed cost. Variable costs: depends on the quantity of goods sold or service preformed. Mostly used in the actual production or service. Fixed costs: are constant, independent of sales or other variable. Break-even point: number of units a business must sell at a given price to cover its costs. Economics of sales: the more products a company makes, the lower the cost of production for each item. Ways to use economics of sales: develop products for private-label companies: yyz: creating a barrier to entry for competitors: Having a low price to discourage from new companies entering the market. Low prices will lead to increase in volume, thus lower cost per unit.
