Introduction
Oh, superheroes in the world of accounting, we salute you! 🦸♂️🦸♀️ Today, we’re opening the comic book of Business Finance to introduce you to the hero of the hour—Full Cost Pricing! This pricing strategy doesn’t wear a cape but ensures that every product sold keeps your business coffers jingling and singing.
What is Full Cost Pricing?
Imagine you’re a chef 🧑🍳 making a sumptuous pie 🥧. To ensure you sell it at a reasonable cost, you tally up all the ingredients, kitchenware wear and tear, and perhaps even that stint in culinary school for the Michelin star aspirations. Full cost pricing does just that but for your business! It’s a method of setting the selling price of a product or service. The aim? To consider all the costs likely to be incurred in its supply.
Types of Costs
Direct Costs
These are the Robin to your product’s Batman. No, really! Whether it’s raw materials or labor costs, directly involved in crafting your prodigious offering.
Indirect Costs
These sly characters support the main show but aren’t always visibly tied to the product. Think of factory lease, electricity, and day-to-day operations. They also include that mysterious character we all fear: Depreciation.
More inspiration:
graph TD;
A[Full Cost Pricing] --> B[Direct Costs];
A --> C[Indirect Costs];
B --> D[Raw Materials];
B --> E[Labor Costs];
C --> F[Factory Lease];
C --> G[Electricity];
C --> H[Depreciation];
Formulas & Fun 🎉
Full Cost Pricing calculation couldn’t be simpler—just add your direct and indirect costs and then sprinkle some desired profit margins on top!
x = Direct Costs + Indirect Costs + Desired Profit Margin
Voila! You’re ready to serve this pricing to your customers!
Why Full Cost Pricing?
Stability & Predictability 📉
Unlike that crypto investment you made last year, full cost pricing isn’t a rollercoaster of numbers. Consistent costs and consistent profits—it’s like that friend who always has snacks.
Easy Kombat Mode 👾
Comparing Full Cost Pricing with Cost-Plus Pricing and Marginal Cost Pricing feels like a video game. Each has its unique powers, but full cost pricing boasts a well-balanced k+d approach (Killer + Defense, of course!).
graph TB;
FC[Full Cost Pricing]
CP[Cost-Plus Pricing]
MC[Marginal Cost Pricing]
FC --> A(Direct Costs);
FC --> B(Indirect Costs);
CP --> A;
CP -->
