Prices and Costs

Prices and Costs

One of the company decisions that is usually left behind is pricing. A product or service selling price, and its costs, are going to determine the company remains profitable or not. However, multiple factors are constraining your price, so then companies normally decide to handle internal costs rather than attacking the most efficient option: price increase.

By means of this calculator, we can get an estimate of how a price increase will affect our margins, comparing this option to a variable cost reduction, and to a fixed cost reduction (SIMULATION):

 

  • Scenario A - 1% average price increase.
  • Scenario B - 1% variable cost reduction.
  • Scenario C - 1% fixed cost reduction.

 

Moreover, we show the efforts should be made if you decide to apply a cost reduction (variable or fixed) in order to get the same effect as a 1% price increase (EQUIVALENT EFFECT).
The only required information is average price, units sold, total variable costs and fixed costs.

 

SIMULATION
EQUIVALENT EFFECT