4.2 Calculation & Pricing

4.2.1 Market price, cost price, selling price

In pricing, the market price, the cost price and the sales price play the decisive role. Calculating the price of an offer requires knowledge of the market price and the cost price. Only then can the decision be made for the sales price.

• The determination of the market price can be done through a targeted market investigation. The market prices are to be determined for the products and services offered. For this purpose, the sales prices of competitors should be closely examined. The better the market research, the more accurate the basis for your own calculation.
• The cost price must first be determined on a full cost basis. In full cost accounting, all operating expenses are included and allocated to the individual offer. The cost price must include both direct and indirect costs. The cost price does not guarantee that this price can also be achieved as a sales price in the market.
• The costs of an individual company are not the only decisive factor for the sales price. The customer decides on the sales price in competition with the other competitors. The customer decides what, where and at what price he buys something.
•  In the long run, the relationship between supply and demand determines the market price. The individual company will align its sales prices with the market price. The sales price can deviate upwards, deviate downwards or be equal to the market price. The decoupling from the market price - the sales price is far above or below the market price - must be justified by special conditions in the market or by operational conditions.  

When determining the sales price, the business plan must also take into account price fixing: e.g. official maximum or minimum prices, as in the case of agricultural products; e.g. horizontal price fixing through cartel-like agreements by competing companies; e.g. vertical price fixing through "recommended retail prices".

Regulations for price labelling must also be observed: e.g. in the retail trade, in the hospitality industry, in offers, at petrol stations, in the banking industry.

If the sales price to be achieved is above the calculated cost price, the entrepreneur's profit increases. If the sales price to be achieved is below the calculated cost price, there is a reduction in profit. If the cost price is permanently undercut, the enterprise will make losses.