Price structure


Composition of the price of any kind of goods and servicesis a set of certain components that belong to the number of absolute values. But we should not identify the notion of "price composition" with the notion of "price structure". A detailed explanation of this will be given in the following article.

The structure of prices is nothing more than athe relative expression of all elements that are directly included in its composition. Each element can be represented either in percentage terms or in fractions of a unit. In other words, the price structure is that part which is taken by the cost price, profit and taxes in the price of a good or service. Such information allows us to fully appreciate the influence of intermediary organizations on the formation of retail prices. From an economic point of view, the price structure is a combination of cost, profit, excise, VAT, wholesale and retail premiums. Let's consider in more detail each structural element.

Under the cost price it is necessary to understand monetarythe expression of costs for the manufacture and sale of goods. There are several groups of costs. The main ones are material (general production expenses), costs for payment of wages, depreciation of fixed assets and various deductions (for example, in a pension fund). The analysis, as well as an estimation of the cost price of the sold products, allows to determine the amount of expenses for the release of goods, and the results of such analysis give an opportunity to find ways to reduce them.

The composition and structure of prices are the main factors,which are taken into account when choosing a pricing strategy. Experienced managers know that the prevalence of prime cost in the price structure is evidence of a decline in competitiveness. The high profit margin and stability of the enterprise is evidenced by a large share of profits. As an economic category, it shows the net income received in the sphere of material production (its economists are often called the economic effect).

It should also be noted that the pricetaxes are included, namely: social and indirect. The first are deductions to various funds (pension, employment fund, medical fund, as well as social insurance). Indirect taxes include value added tax (known as VAT), as well as excises. It is important to remember that indirect taxes are included in the price of goods (services) and are transferred to the budget.

On the way from production to the sale of goods is notyou should forget about the surcharges of wholesale and retail organizations. The value depends on many factors. For example, on the type of product or the timing of its implementation. Most of the products are distributed through wholesale organizations. Based on this, the amount of extra charges for such companies is much lower than the retail premiums. Wholesalers receive their profit from the turnover of goods.

As for retail companies, through themthe products are delivered directly to the consumer. The retail mark-up of a retail organization includes profit and distribution costs. The price of the wholesale organization and the retail premium are the two main components that form the structure of the retail price. It can be depicted schematically. At the head of the scheme there will be a retail price, which is divided into the selling price of the purchase and the retail mark-up. In turn, the vacation is divided into the producer's selling price and the intermediary surcharge. The manufacturer's selling price includes prime cost, profit, excise and VAT. The schematic structure of the retail price is very simple and convenient enough to use, so it is so often and successfully used in practice.

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