The amount of money that the seller wants to receive, and the buyer agrees to give for a unit of goods, is the price of the product. The sales volume completely and completely depends on its level , and the revenue volume also follows from this. This means that the price of products is a factor that directly affects revenue. What influences this? The level of prices is determined by production costs and the implementation itself, where the maximum level regulates demand. Thus, the price of products is also a mechanism to ensure a balance between supply and demand.
Pricing
First of all, in pricing, you need to determine the level of demand. It can be upgraded to specific products or to products of a particular enterprise. Also, demand may vary depending on the region and the entire domestic market. For pricing to be correct, you need to understand that the price of a product is a whole set of characteristic concepts related to the certainty of demand. This indicator is considered for at least three components.
These are the volumes of market demand, which depend on the exact quantity of products that will be acquired by certain buyers in a certain territory at a certain time and with the help of certain trading enterprises. The calculation of the price of products also depends on the capacity of the market. What it is? Capacity is the highest limit, where maximum demand strives for. The volume of demand mainly depends on this indicator. He makes up a certain fraction of it. Also, the calculation of the price of products dictates the value of demand. It is estimated by the quantity of one or another product that is supposed to be sold to the buyer at a fixed or contractual value. The types of prices for products can be different, that is, if demand is multiplied by the price, the value of demand will be obtained.
Profit
The most important element in the price of a unit of production is profit, which is net income in monetary terms. It is created by the enterprise in production and is formed after implementation. Making a profit in a market economy is the main goal of any business. After all, this is the main source for the formation of financial and material resources of each enterprise, its social and industrial development. The greater the profit in the price of a unit of production, the wider the company's ability to develop and improve the financial situation of its employees, to strengthen its financial condition. The state is also interested in the growth of such income in private enterprises. After all, income tax is a significant share in the state budget revenues.
Here it is necessary to note the discrepancy between the economic meaning of profit and the concept of its calculation in accounting. The economic content of this concept is the net income received in the process of the enterprise. But the quantitative calculation of profit in all its forms must be determined by the accounting system, which considers the costs and prices of products. A very significant influence here has a legislatively established procedure for the formation of a financial result.
Market price of products
The monetary expression of the value of a product, that is, its price, is an element of market conditions and a market mechanism that forms the market and affects the market price. In world economic practice, there are several approaches to the problem of establishing this indicator. First of all, the basis is supply and demand, planned costs related to the production of certain products, and there may also be a contractual basis. All these are components of the price of goods. The main motive for deciding on the choice of production of a particular product and on its quantity is the receipt of benefits, which are influenced by the price system established during implementation. Profitability is determined by the market. In other words, at the cost of implementation. If this indicator is higher than the costs of production and sales, then producing such products is profitable.
In the market, prices are added, as already mentioned, on the basis of supply and demand for a particular product. It does not depend on costs. In this case, it is not difficult to determine the price of a unit of production, since it will be set. There is a certain relationship between the value of demand for a given product and its market price, which is called the demand curve (or demand scale). If you arrange this graphically, you can easily calculate that the lower the price, the higher the demand and consumption. What affects the end result? The price is set necessarily taking into account all components of the price of products: demand for a given type of product, cost of manufacturing, delivery, sales of it, prices set by competitors, the number of offers of the same products from other manufacturers.
Price types
Groups of types of prices are formed depending on the size of the market - prices of foreign trade and domestic, international markets and world are determined in completely different systems, although the relationship through international integration over the years has been strengthening, approaching the uniform rules for the formation of the structure and levels of certain types of prices. In the national economy, its service sector differentiates prices. In this case, the features of different areas of management are taken into account.
Here the main types are as follows:
- wholesale price of products;
- retail price;
- procurement, as well as tariffs;
- prices for construction products;
- foreign trade prices, that is, export prices for domestic products and import prices for foreign products.
The latter group is formed in principle differently than national ones. Information about competitors and prices of manufacturers selling similar products on the world market is important here.
Export define otherwise. After all, it is precisely according to them that foreign trade organizations and manufacturers sell products on the world market. You need to choose a reference price and bring it to reality according to the terms of the transaction, taking into account the quality of the product, its transportation, payments, insurance, storage and much more. This also includes export duty and translation into the currency of the country that exports products at the Central Bank rate of the country on the date the transaction is concluded. These are the main components.
Import prices exist for the purchase of goods abroad and are set on the basis of the customs value of the products. At the same time, customs duties, exchange rates and costs of domestic sales are taken into account. Indirect taxes are of great importance here, and the whole structure of import prices depends on them.
Accounting and redistribution function of prices
The functions characteristic of all types of prices are common properties objectively inherent in the category under consideration. The economic literature offers four types. This is an accounting, stimulating, redistributive and balance function between supply and demand. The first type involves comparing prices that are incomparable in consumer characteristics, where the value expression is determined by macroeconomic or industry indicators, as well as indicators of a particular enterprise.
The redistributive function involves redistributing the created social product between different economic links, regions, sectors of the economy and population groups. For example, the state keeps the price level for cars, tobacco products, alcohol, and this level significantly exceeds all costs of production and sales. Revenues are supposed to be used to maintain low prices for essential goods. Does this work out is another question.
Stimulating function and balance function
The stimulating function is the encouraging and restraining effect of prices on various spheres of production. Progressive products have no such restrictions, and the growth of production profit is not restrained by anything. But products with costly components are covered by tough price limits. The essence of the demand-supply balance function is to achieve a certain price level.
The classic unregulated market spontaneously regulates social production. As a result, capital flows from industry to industry, excess production is curtailed, freeing up resources for deficit production. Social work in this option is not spent rationally. If the economy is regulated, the balance function is performed not only by prices, but also by state financing, lending, tax policy and much more.
Cost and price
The optimal price of products is not too easy to determine. If it is prohibitively high, it will not work to attract buyers, and if it is low, there will not be sufficient profit. It is especially difficult to set a price for a small company, because the economic scope is insufficient and the competition in prices is high. How to be In any case, the formula for the price of products is one. The more units are produced, the lower the cost. This rule is most often used in order to get sufficient profit and win in price from competitors at the same time. And it is small firms that rarely have such an opportunity. After all, they have to deal with the tough pricing policies of large firms.
The cost of production includes all current costs of production and sales, and they are always expressed in cash. This should include material costs for the cost of materials and raw materials, energy, fuel and the like. It also takes into account the wages of employees, deductions to pension, insurance and other funds, deductions for depreciation of equipment and many other expenses - fines, penalties, rent, and so on. All this must be taken into account when determining the average price of products.
It must be remembered that this indicator is a tool for correlating producer capabilities with customer needs. But pricing should always be preceded by a thorough analysis. This is a prerequisite. Prices are easier to change than the product itself or the mode of distribution, and pricing almost always affects the conduct of business.
Retail and wholesale price of products
In the case of sales of products by industrial enterprises or their intermediaries in large volumes, that is, in bulk, without any assistance in sales by various retail trade organizations, wholesale prices are called wholesale prices. This indicator is used in other cases. For example, if enterprises agree to sell their products to each other, if sales are carried out between sectors, and also from production to a retail network, when the products are sold to trading organizations, and not to the population, which practically does not use the wholesale trade, even in small lots. If the goods are sold at wholesale prices, transactions are usually carried out by bank transfer.
Retail prices are intended for the sale of products to the final consumer, that is, to the population, since it is consumer products. In such cases, cash is usually paid.
Procurement prices are used by producers of agricultural goods when they are sold in large volumes either to the state or to a certain processing enterprise. It is worth considering the nuances. If these organizations do not want to sell agricultural products, but, for example, excess equipment, then they use wholesale prices.
Usually, large volumes of agricultural products are purchased by state bodies in order to create funds for the material base, fulfilling the tasks of state policy. Also, various non-governmental organizations and enterprises — meat plants and dairies — buy large quantities of similar goods. If the sale of agricultural products is intended for the population, then you need to use the concept of retail price.
Purchase price
The concept of the purchase price differs from the price of government purchases, we can say, fundamentally. Let's consider in more detail. Government purchases are made at prices that are set for a wide variety of products, not just agricultural, to form centralized state funds. Goods of such a plan always have special significance, since they are the most important. These are the main strategic types of fuel, raw materials, cotton, grain and the like. Thus, national tasks of national importance are solved, and the state provides many, many benefits to sellers of such products.
A statistical analysis of the applied purchase prices should go through the main stage - an assessment of the general price level. after that it is necessary to summarize the obtained indicators. Thus, the absolute or relative value of prices for a particular product will be revealed. Here, as a rule, the levels of income and expenses are reflected in a certain period of time, in specific territories and specific enterprises.
You can determine the price level by comparing the current period with any other basis for similar or identical products with similar consumer properties. Then, correction factors are applied. So they make a direct measurement of changes in the level of price dynamics.
Analysis
In practice, pricing most often uses data that shows the average price of products for homogeneous groups with generalized characteristics. Calculations of general indices for food and industrial goods are also widely used. This is the main tool for this analysis of price levels. They are standardized and in comparison with internal and external prices. In other words, they are analyzed relative to various economic indicators.
Inter-industry or intra-industry price ratios are determined by the prevailing levels of pricing. So you can calculate the increase or decrease in living standards. If the growth of retail prices, for example, is higher than the growth of household incomes, we observe a decrease. We give one more example. If the purchase prices for agricultural products do not increase compared with the increase in prices for industrial goods that agricultural enterprises need to purchase, this exchange is not equivalent and unprofitable.
Product selling price
The selling price with which the company enters the market is easiest to calculate if a fairly simple formula is applied: C = C + P + Ca + VAT + Hp.
The letters indicate the following:
- C - selling price;
- C - actual cost in full;
- P - profit;
- Ca - excise taxes in the amount;
- VAT - everyone knows that this is a value added tax;
- NP is a sales tax.
It has already been said what is the actual cost. This is the inclusion of all production costs and business expenses. Profitability (or profitability) of products is determined precisely by the amount of profit. You can evaluate it using the profitability ratio, the formula of which is present in the illustrations for this article.
But excise taxes in total are determined for each type of product in its own way. What does it mean? Only excisable goods, such as alcohol, alcohol, tobacco, gasoline and the like, have their own firm excise taxes with a specific contribution amount for each unit of production (kilogram, liter, and so on). Such indicators are called specific.
Cars and jewelery have an interest rate on value, which is called ad valorem rates. VAT is defined as a percentage of the actual cost of production plus profit on it. And the sales tax is a percentage, where not only profit is added, but also VAT.
The selling price of the company's products must necessarily be higher than the cost of three values. This is the amount of profit in the amount of sales tax and the value of VAT. All these indicators are transferred to the state budget.