Pricing

3 tools in the Finance and Business area.

Break-Even and Pricing

Cost-volume-profit analysis for a single product (contribution margin and its ratio, break-even units and revenue, the volume for a target operating income or an after-tax target net income, margin of safety in units, revenue and percent, degree of operating leverage, the CVP and profit-volume charts and a one-factor-at-a-time sensitivity table); multi-product break-even for a pasted sales mix (weighted-average contribution margin, bundle method, break-even in total units, per product and in revenue); and price elasticity from pasted price, quantity observations (midpoint arc elasticities, a constant-elasticity demand fitted by log-log least squares with the standard error and confidence interval of the elasticity, a linear demand fit, the profit-maximizing price under each model for an entered unit cost by the inverse-elasticity (Lerner) markup rule, and the revenue and profit curves against price). The default case is the Acoustic Concepts example of Garrison, Noreen and Brewer (price 250, variable cost 150, fixed costs 35,000: break-even 350 units and 87,500 of sales, 750 units for a 40,000 profit), with the GMAT and GRE sales mix of Horngren, Datar and Rajan and an illustrative six-point demand table of elasticity about −2.

6 worked examples reproduced, listed on the tool page.

Job Quote Builder

Cost build-up and price for a manufacturing or service job quote: material lines with a scrap allowance, labour and machine operations with setup hours amortized over the lot, subcontract and outside services per unit or per lot, one-time tooling, overhead by percent of direct labour, percent of total direct cost, a rate per hour or an activity-based rate table, G&A, contingency, and the price by a markup on cost or a margin on price grossed up for commission and the payment-terms discount, with sales tax and freight below the line. The page reports the build-up per unit and per lot at every quantity break, the markup-to-margin conversion, the break-even quantity of the quoted price against the fixed setup and tooling, a sensitivity table (material and labour ± 10 %, scrap ± 2 points, markup ± 5 points), the price for a target margin and the margin at a competitor's price, a quote-ready line-item summary and a cost-breakdown chart. The default case is an illustrative machined bracket in four quantity breaks; the example selector loads the job cost sheet of job 2B47 of Garrison's Yost Precision Machining illustration (direct materials 1,404, direct labour 180 for 27 hours, overhead 216 at 8 per hour, total 1,800 for two units), Horngren's Robinson Company job WPP 298 (4,606 + 1,579 + 3,520 = 9,705) and the Astel Provalue cost-plus price (12 % on 720 = 806.40).

3 worked examples reproduced, listed on the tool page.

Pricing Waterfall

Transaction-price analysis after Marn and Rosiello's pocket price waterfall: a list price and the pasted leakage elements (discounts, payment terms, rebates, co-op advertising, promotions, freight, each an amount per unit or a percent of the list, invoice, pocket or prior price, on-invoice or off-invoice) give the invoice price, the pocket price, the pocket margin after cost of goods and variable cost of sales, each element's share of the list price, the cumulative leakage and a labelled waterfall chart; the four profit levers (operating-profit change for a 1 % improvement in price, variable cost, volume and fixed cost) for the entered income statement beside the article's Compustat averages; the break-even volume change of a price move; and from a pasted transaction set the pocket price band (histogram of volume by pocket price, range, volume-weighted mean, accounts below a floor, pocket price against account volume with the correlation). A second part builds the price-volume-mix revenue bridge between two periods by the standard or the sequential convention, with the gross-margin bridge when unit costs are given. The default case is the Castle Battery Power-Lite waterfall of the article (base price 28.40 → invoice 21.16 → pocket price 18.18, a 36 % pocket discount) with an illustrative cost, income statement and transaction set, and an illustrative six-product bridge.

1 worked example reproduced, listed on the tool page.

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