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Costing and Pricing

The document summarizes the topics and sections that will be covered in a pricing and costing seminar for MSMEs. The seminar will cover differentiating between price and cost, pricing strategies, choosing the right pricing strategy, presenting costs, and calculating costs, selling prices, and profits. Specific sections will include costing, gross and net profits, calculating selling prices using markups and markups, and basic bookkeeping. Formulas and examples are provided for calculating costs, profits, selling prices, markups, markdowns, and the differences between them.

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46 views30 pages

Costing and Pricing

The document summarizes the topics and sections that will be covered in a pricing and costing seminar for MSMEs. The seminar will cover differentiating between price and cost, pricing strategies, choosing the right pricing strategy, presenting costs, and calculating costs, selling prices, and profits. Specific sections will include costing, gross and net profits, calculating selling prices using markups and markups, and basic bookkeeping. Formulas and examples are provided for calculating costs, profits, selling prices, markups, markdowns, and the differences between them.

Uploaded by

rose gabon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 30

AND

PRICING
SEMINAR
DTI SAMAR CONFERENCE HALL, CATBALOGAN CITY
AUGUST 15, 2019

(MICRO SMALL & MEDIUM ENTERPRISES)


TOPICS:
SESSION 1: Differentiate the price and Costing
SESSION 2: Pricing Strategy and Product Costing
SESSION 3: Choosing the Right Pricing Strategy
SESSION 4: Presentation of Cost
SESSION 5: Calculating Costs, Selling Prices and
Making a Profit

Section A: Costing
Section B : Gross and Net Profit
Section C: Calculating the Selling Price
Section D: Initial Markup or mark-on
Section E: Additional Markup
section F: Markup Cancellation
Section G: Markdown

SESSION 5: SIMPLE BOOKKEEPING


Calculating Costs,
Selling Prices and
Making a Profit
SECTION A: COSTING

To determine a selling price of a recipe or a dish, the first task is to calculate its
cost.
Dish: Genoise sponge No. of portions: 8
INGREDIENT QTY Required Unit of Unit cost Recipe cost
INGREDIENT QTY Required Unit of
purchase Unit cost Recipe cost
purchase
Eggs
Eggs (number)
(number) 44 3030 6.00(6/30*4)
6.00 0.80
0.80

Caster sugar (g) 100


100 1000
1000 2.50
2.50 0.25
0.25

Soft Flour (g) 100


100 1000
1000 1.20
1.20 0.12
0.12
Butter (g) 50
50 1000
1000 44 0.20
0.20
Total cost
Total cost 1.37
1.37
Cost
Costperper
portion
portion 0.17
0.17
EXAMPLE
Taking the caster sugar example, the unit cost is 2.50 fro
1000g(1kg) and the amount required for the recipe is 100g. To
Calculate the amount used in the recipe, the following
calculation is used.

Solution:
2.50/1000*100 = .25
Cost per portion
1.37/8 no of portion = 0.17
APPLICATION
Activity 1
The cost for making 8 portion of Genoise Sponge are shown
above. Now Calculate the cost of making 12 portions of genoise
sponge using the Table.
INGREDIENT QTY Required Unit of Unit cost Recipe cost
purchase
Eggs (number) 4 30 6.00 0.80

Caster sugar (g) 100 1000 2.50 0.25

Soft Flour (g) 100 1000 1.20 0.12


Butter (g) 50 1000 4 0.20
Total cost 1.37
Cost per portion 0.17
SECTION B: GROSS AND NET PROFIT

• Gross profit is a simple calculation that expresses the


difference between the price that materials or goods ( food)
were bought for and the price at which they were sold.
• EXAMPLE
If the food costs to produce a dish come to 2.50 and the dish is
sold for 7.50. the gross profit produced is 5.00 Selling price
(7.50)- Food Costs (2.50)= Gross Profit (5.00)
Sol’n
Selling Price- Food cost= gross Profit
7.50-2.50=5.00
NET PROFIT

Net Profit (or loss) express the difference


between the price that materials or goods (food)
were sold for with all associated costs
subtracted. This includes the materials costs
(e.g. food), labour costs and all other overhead
costs ( e.g, packaging, power costs, rent, etc.)
EXAMPLE:

For example, if the selling price(sales) of a dinner for 100


people came to 1000, the food cost totalled 250, labour cost
were 400 and associated overhead cost came to 150, the net
Profit would be 200.
Sol’n:
Sales 1000
Less: Food cost 250
Labour cost 400
Overhead 150 (800)
Net profit 200
SALES (1,000)- TOTAL COSTS (800)= NET PROFIT (200)

In the same way as for gross profits, net


profits are also commonly expressed as
percentage Net Profit (200) divided by
Sales (1,000) and multiplied by 100.
200/1000*100=20%
APPLICATION

ACTIVITY 2:
SELLING FOOD COST GROSS PROFIT GP AS %
PRICE
10.00 2.75

12.50 4.30

7.95 3.10

14.90 4.65

31.65 7.90
ACTIVITY 3
SALES FOOD LABOUR OVERHEAD TOTA NET NET
COSTS COSTS COSTS L PROFIT PROFIT
COST AS %
140.55 40.99 50.50 23.34

175.98 55.45 61.25 34.00

268.94 81.38 90.45 74.88

555.65 120.00 155.98 111.54

1010.80 300.70 240.54 230.78


SECTION C: CALCULATING THE SELLING
PRICE

Price can be a sensitive issue. If priced too high,


a dish may not sell or customers may complain
or not return to the business as they may feel
they have not received value for money.
Alternately, if a dish is under priced and does
not make a profit, the business will be damaged
financially and will face problems in the future
if it does not rectify the situation.
SECTION C: CALCULATING THE SELLING
PRICE

A method to ensure that a profit margin is achieved is


to build a target percentage of gross profit into the
selling price.
For example, if the food costs for a dish total 3.00 and
a gross profit target is set at 70%, the food cost as a
percentage of the selling price can only represent 30%.
It is important to note that the selling price is the total
amount of money that will be received so this has to
represent 100% for the purpose for this calculation.
SECTION C: CALCULATING THE SELLING
PRICE

SELLING PRICE = 100%

30%
GROSS PROFIT
FOOD COST

70%
SECTION C: CALCULATING THE SELLING
PRICE

SELLING PRICE=10.00

GROSS PROFIT
FOOD COST

7
SECTION C: CALCULATING THE SELLING
PRICE

In basic terms, food costs + gross profit = selling price

To calculate the selling price on this basis, the food costs have to
be expressed as a person the following calculation.

Food Cost / food cost as a % of the selling price * 100


APPLICATION

Activity 3
If food costs for a dish come to 4.50 and the gross profit target is
75%, the food cost as a percentage of
The targeted sale is 25%.
To calculate the selling price:
4.50/25 * 100 = 18
APPLICATION

Calculate the selling price from the food cost and gross profit
target indicated in the table below.
3.55/35
FOOD COST GROSS PROFIT FOOD COST AS Selling Price
TARGET % OF Selling
Price
3.55 65% 35

4.65 70% 30

2.32 75% 25

5.00 80% 20

1.24 85% 15
COMPUTING THE NET INCOME OR NET LOSS

SALES 200,000 50,000

Operational Cost

Salaries 5000 10000

Water Bills 3200 25,000

Insurance Fee 1500 10,000

Miscellaneous Fee 2100 15000


INITIAL MARK-UP OR MARK-ON

• -refers to the amount added to cost to arrive at the original


selling price, also known as MARGIN. It is the difference
between the original selling price and the cost.
Example:
• If he or she marked the merchandised he or she bought for
P100.00 to sell at P120.00, the P120.00 is the original selling
price and the P20.00 is the initial mark-up or mark-on
• Cost P100.00
• Plus: Initial Mark-up or mark-on 20.00
• Original Selling Price P 120.00
ADDITIONAL MARK-UP

• -refers to amount added to the original selling price to arrive at


a new selling price. In our example, if the trader decide to
increase his or her selling price from P120.00 to P150.00, the
new selling price, then the P30.00 he or she added to the
original selling price of P120.00 is the additional markup.

Original selling price P120.00


Plus: Additional markup 30.00
New selling Price P150.00
MARK-UP CANCELLATION

• -refers to the decrease in the new selling price that does not
decrease it below the original selling price.

New Selling Price P150.00


Less: Markup Cancellation 10.00
Reduced selling Price P140.00
Less: Markup cancellation 20.00
Original selling price P120.00
MARKDOWN

• Refers to reduction in the original selling price.

New Selling Price P120.00


Less: Mark down 5.00
Reduced selling Price P115.00
Less: Markdown 5.00
Original selling price P110.00
DIFFERENCE BETWEEN MARKUP AND
MARGIN

MARGIN-(also known as gross margin) is sales minus the cost


of goods sold. For example, if a profit sells for P200.00 and cost
P140.00 to manufacture, its GROSS MARGIN is P60.00. stated
as a percent the margin is 30% (calculated as the margin divided
by sales).this is the markup based on sales or selling price.

Markup is the amount by which the cost of a product is


increased in order to derive the selling price. Example: a markup
of P60.00 to the P140.00 cost yields the P200 selling price.
EXAMPLE

MARGIN MARKUP
Cost P140 70% 100%
Markup P 60 30% 42.86%
Selling Price P200 100% 142.86%
GROUP ACTIVITY

Group yourselves into five. Generate money


that you will use to buy something that you are
sure you can sell. Agree among yourselves on
how much you are to sell whatever you bought.
Compute for the mark-up. What percent is it of
your cost? Your Selling Price? Were you able to
sell it?
COMPLETE THE FOLLOWING TABLE:

SELLING PRICE COST MARKUP


a. 480 360 120
b. 900 200
c. 300 120
d. 600 230
E 400
F 500
g. 500
h. 1200
COMPLETE THE FOLLOWING TABLE:

ORIGINAL NEW SELLING MARKDOWN MARKDOWN


SELLING PRICE PRICE RATE
415 385 30 7.79%
265 200
165
285
177.60 29.60
89.70 11.70
620 74.40
540 43.20
300 30%
150 25%
• THANK YOU & GOD BLESS!!!!

“You better live your best and act your best and think your
best today,
• For today is the sure preparation for tomorrow and
all the other tomorrows that follows”

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