Cost breakdowns must be deliberately maintained. This information is necessary to generate accurate cost estimates. Cost-plus pricing profit maximizer что это especially common for utilities and single-buyer products that are manufactured to the buyer’s specification such as military procurement.

The two steps in computing the price are to compute the unit cost and to add a markup. The unit cost is the total cost divided by the number of units. The total cost is the sum of fixed and variable costs. Fixed costs do not generally depend on the number of units, while variable costs do.

The markup is a percentage that is expected to provide an acceptable rate of return to the manufacturer. Buyers may perceive that cost-plus pricing is a reasonable approach. In some cases, the markup is mutually agreed upon by buyer and seller. In product areas that feature relatively similar production costs, cost-plus pricing can offer competitive stability if all firms adopt cost-plus pricing. Cost-based pricing is a way to induce a seller to accept a contract whose total costs represent a large fraction of the seller’s revenues, or in which costs are uncertain at contract signing.

Although this method of pricing has limited application as mentioned above, it is commonly used for the purpose of ensuring a firm is «breaking even» and not operating at a loss. In spite of its ubiquity, economists rightly point out that it has serious methodological flaws. It takes no account of demand. Price is equal to marginal cost. When business people choose the markup that they apply to costs when doing cost-plus pricing, they should be, and often are, considering the price elasticity of demand, whether consciously or not.

This article includes a list of references, related reading or external links, but its sources remain unclear because it lacks inline citations. An optimal decision is a decision that leads to at least as good a known or expected outcome as all other available decision options. It is an important concept in decision theory. In order to compare the different decision outcomes, one commonly assigns a utility value to each of them. Utility» is only an arbitrary term for quantifying the desirability of a particular decision outcome and not necessarily related to «usefulness. The problem of finding the optimal decision is a mathematical optimization problem. In practice, few people verify that their decisions are optimal, but instead use heuristics to make decisions that are «good enough»—that is, they engage in satisficing.

In case it is not possible to predict with certainty what will be the outcome of a particular decision, a probabilistic approach is necessary. An example is the Monty Hall problem. Berger Statistical Decision Theory and Bayesian Analysis. Please forward this error screen to baber. Get in touch Call or email today to learn more about how our collection solutions can benefit your business.

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