Harga - Variabel cost

pricing - variable or marginal cost pricing

With variable (or marginal cost) pricing, a price is set in relation to the variable costs of production (i.e. ignoring fixed costs and overheads).

The objective is to achieve a desired “contribution” towards fixed costs and profit.

Contribution per unit can be defined as: SELLING PRICE less VARIABLE COSTS

Total contribution can be calculated as follows:

Contribution per unit v Sales Volume

The resulting profit in a business is, therefore:

Total Contribution less Total Fixed Costs

The break even level of sales can be calculated using this information as follows:

Break even volume = Total Fixed Costs / Contribution per Unit

Consider a business with the following costs and volumes for a single product:

Fixed costs:
Factory production costs	�750,000
Research and development	�250,000
Fixed selling costs	�550,000
Administration and other overheads	�325,000
Total fixed costs	�1,625,000
Variable costs
Variable cost per unit	�8.00
Mark-Up
Mark-up % required	35%
Budgeted sale volumes (units)	500,000

Prices are set using variable costing by determining a target contribution per unit. This reflects:

• Variable costs per unit

• Total fixed costs

• The desired level of target profit (i.e. contribution less fixed costs)

The variable/marginal costing method can be illustrated using the same data used further above:

• Assume that the selling price per unit is £12

• Variable costs per unit are £8

• The contribution per unit is, therefore, £4 (£12 less £8)

What is the break even volume for the business?

• Total fixed costs are £1,625,000

• To achieve break-even, therefore, the business needs to sell at least 406,250 units (each of which produces a contribution of £4)

Looked at another way, what would be the required sales volume to generate a profit of £250,000?

• Total contribution required = total fixed costs + required profit

• Total contribution = £1,625,000 + £250,000 = £1,875,000

• Contribution per unit = £4

• Sales volume required therefore = 468,750 (£1,875,000 / £4)

The advantages of using a variable/marginal costing method for pricing include the following:

• Good for short-term decision-making;

• Avoids having to make an arbitrary allocation of fixed costs and overheads;

• Focuses the business on what is required to achieve break-even

However, there are some potential disadvantages of using this method:

• There is a risk that the price set will not recover total fixed costs in the long term. Ultimately businesses must price their products that reflects the total costs of the business;

• It may be difficult to raise prices if the contribution per unit is set too low

Sumber :tutortuyu