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The Basics of Costing & Pricing Limpopo Provincial Treasury Procurement Seminar

The Basics of Costing & Pricing Limpopo Provincial Treasury Procurement Seminar Thursday 12 th August 2010 By: Allan Govender. Overview. The Trading Cycle Brief explanation of the concept of Costing Brief explanation of the concept of Pricing

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The Basics of Costing & Pricing Limpopo Provincial Treasury Procurement Seminar

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  1. The Basics of Costing & Pricing Limpopo Provincial Treasury Procurement Seminar Thursday 12th August 2010 By: Allan Govender

  2. Overview • The Trading Cycle • Brief explanation of the concept of Costing • Brief explanation of the concept of Pricing • Cost differentiation and its’ effect on pricing • Internal & external factors that impact on pricing decisions

  3. The Trade Cycle • ADD VALUE • E.G. • Producing products • Repackaging • Branding process BUY GOODS SELL GOODS • COST YOUR GOODS • Costing • Pricing “Profit Funds the Trading Cycle

  4. Costing • Involves taking into account all the activities/processes that enable one to offer a product or a service.

  5. Costing • Different businesses involve different activities/processes, therefore • costing is done differently. FIXED COST + VARIABLE COST = TOTAL COST

  6. Pricing • Is the process of allocating a Rand Value to the product/service you • are selling. R 18.99 PRICE = Manufacturing COST PRICE OVERHEADS PROFIT R

  7. Pricing cont… • The difference here is that you are selling your expertise MEASURED • IN TIME. You are selling the know-how as well as how long it takes. R 18.99 PRICE = Service OVERHEADS PROFIT YOUR COST

  8. Pricing cont… • Calculation of your cost in the Service Industry. • Determine Total Monthly Overheads. • Determine HOURS SOLD. • Calculate COST PRICE per hour MONTHLY OVERHEADS HOURS SOLD COST PRICE/HR No. of workdays p.m. X No. of hours p.d. ÷ = Rands/ hour

  9. Internal/External Factors Affecting Pricing • Competition • Costs • Supply and demand • Image • The type of product/service • Unique products • New technology • Product positioning association • Environmental factors • Price doesn’t matter • Survival

  10. Golden Rules of Pricing • Who is your Customer? • What can he/she afford? • What is your customer prepared to pay? • What is your competition doing? • Is your product/service different? • What is the quality of your service? • What are your profit expectations?

  11. Contact Details Seda WATERBERG Desimale Building 98 Nelson Mandela Street Modimolle Tel: 014 717 1564 Fax: 014 717 3266 E-mail: agovender@seda.org.za THANK YOU

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