Protect your business by understanding common social engineering techniques
1 Comments - 03 Apr 2012
Social engineering is the manipulation of the natural human tendency to trust. A social engineer’s main goal is gaining unauthorized access to systems or information in order to commit fraud. In most cases the social engineer never comes face to face with the victim. Social Engineering is steadily increasing as cyber criminals exploit people in to...

More Link
A fast, accurate, and affordable way to do online market research
0 Comments - 03 Apr 2012
From international brands to local food trucks, every business wants to make important decisions with their customers’ feedback in mind. Which version of your new logo will people like better? How much interest do dog owners have in organic dog food? Is your brand awareness growing over time?We now have a new option for companies looking to answer...

More Link
Top Blogs

Rabu, 13 Mei 2009

pricing - return on investment method

The "return on investment" pricing method determines the price of a product based on the target return on the amount invested in a product:

The calculation is as follows:

Unit Price

Total costs (fixed and variable) + (% return x Investment)

Budgeted sales volume

This calculation can be illustrated using the following example:

Willowbrook Limited has developed a new product called the "Eternal Flame" - a methane-powered heater for use in industrial buildings. Willowbrook requires a return on invested capital of 25% per annum. The sales price for the Eternal Flame should be set using a target return on investment method. The following additional information has been provided:

Budgeted sales volume

25,000 units

Variable production cost per unit

£45

Fixed production cost per unit

£25

Other annual fixed costs (overheads etc.)

£550,000

Investment in new machinery to produce the Eternal Flame

£350,000

Period over which investment in new machinery to be written off

4 years

Research and development costs for the Eternal Flame

£225,000

The total investment in the Eternal Flame is (New machinery + R&D costs)

£575,000

The required annual profit = £575,000 x 25%

£143,750

Total annual costs can be calculated as follows:

Production costs per unit (£45 + £25) x 25,000 units

£1,750,000

Annual depreciation on new machinery (£350,000 / 4)

£87,500

Other annual fixed costs

£550,000

Total annual costs

£2,387,500

Total required annual revenue = total annual costs + required annual profit

£2,531,250

Unit price (total required revenue / budgeted sales volume

£101.25

The use of a targeted return on investment to determine price has the following advantages:

- Consistent with other performance measures - e.g. Return on Investment

- A suitable method for market leaders which are able to set a price which competitors follow

- A relevant pricing method for new products - particularly those which have a substantial investment.

The method does, however, have some disadvantages:

- With new products, there is an inherent uncertainty about what the achieved sales volume will be - which in turn will be influenced by the price chosen

- Some investment may be common to several products or product groups (e.g. an extension to a factory; investment in new development facilities). This raises the question of how to apportion investment amongst products.


http://tutor2u.net/business/marketing/pricing_roi.asp

0 comments:

HOT INFO :
Ads By Google