The price structure

Part of the price of any types of goods and services is a set of components that belong to the absolute values. But we should not equate the concept of “price” with the concept of “price”. A detailed explanation will be given in the article below.

The cost — it is not that other, as the relative expression of all the elements that directly belong to it. Each item can be presented either as a percentage or fraction. In other words, the price structure is the part that takes cost, profit and taxes in the price of goods or services. This information allows you to assess the impact of intermediary organizations on the formation of the retail price. From an economic point of view, the price structure is the combination of cost, profit, excise, VAT, allowances, wholesale and retail organizations. Consider in more detail each structural element.

The cost should be understood the monetary value of the costs of production and marketing of goods. There are several cost groups. The main ones – material (overhead costs), costs for salaries, depreciation and amortization fixed assets, and various deductions (e.g. pension Fund). Analysis and evaluation of the cost of goods sold allows you to determine the amount of the cost of producing the goods, and the results of this analysis provide an opportunity to find ways to reduce them.

The Composition and structure of rates — is the main factors that are considered when selecting pricing strategies. Experienced managers know that the prevalence of cost in the price structure — the evidence of declining competitiveness. High profitability and stability of the company evidenced by a large share of the profits. As economic category it shows the net income earned in the sphere of material production (economists often call economic effect).

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It should Also be noted that the prices must include taxes, namely the social and indirect. The first are contributions to the various funds (pension, employment Fund, medical Fund and social insurance). Indirect refers to the value added tax (known as VAT) and excise duties. It is important to remember that indirect taxes are included in the price of goods (services) and are listed in the budget.

On the way from production to the sale of goods should not forget about the allowances of wholesale and retail organizations. Value depends on many factors. For example, the product or the timing of its implementation. Most of the products distributed through wholesale organizations. On this basis, the amount of overhead these companies much less overhead retail. The profit of wholesale organizations are due to the circulation of goods.

As for retail companies, through their products goes directly to the consumer. Retail mark-up retail organizations include profit and costs of treatment. Price wholesale organizations and retail allowance – two major components that form the structure of the retail price. It can be represented schematically. At the head of the scheme will be the retail price, which is subdivided into the selling price of the purchase and the retail allowance. In turn, the release is divided into the selling price of the manufacturer and the intermediary margin. Part of the selling price of the manufacturer includes cost, profit, excise and VAT. Schematic structure of retail prices is very simple and quite easy to use, so it is so often and successfully used in practice.