How to price quantity orders to increase sales and profits

Article Abstract:

Article presents illustrative case of determining price and return on a quantity order. Case study involves a maker of wooden desks for commercial users which produces 4,000 desks/year with an average price of $250 and an average cost of $225/desk. A new customer wishes to order 1,000 desks at a price of $200/desk. An examination of figures involving incremental revenues and variable and fixed costs shows the breakeven price for the new order computed at $120/desk. The result of accepting the new order would be a rise in the company's return on sales.

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How to price quantity orders to increase your sales and profits

Article Abstract:

Manufacturers can benefit from quantity orders in terms of sales and profits through proper pricing. Even though a high-quantity customer may offer a lower per-unit price compared to low-quantity orders, it is easy to realize substantial profits. One of the analytical methods that can be used in pricing quantity orders is incremental analysis. This involves computing incremental revenues and then subtracting incremental fixed and variable costs to arrive at the profit on order. Another method is to compute the contribution margin.

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How to price quantity orders to increase your sales and profits

Article Abstract:

Advice on calculating prices for business owners is presented. Ways of working out how much to charge in order to breakeven or make a profit on large orders are described.

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