THE INFLUENCE OF TECHNICAL CHANGES ON THE PRODUCT SELLING PRICE
Published: 28 Aug 2016
Abstract: The product price plays an important role and makes the production related costs an important issue to be considered. The more the company is able to reduce its costs, the higher the profit it is able to create from the sales of the product. The price must reflect the market environment in which the buyer is willing to buy the product at the price acceptable. The costs that are to be reduced are of various kinds: material costs, machinery and labor costs, energy costs, costs related to sales etc. All the costs mentioned are connected with the production process itself. For the costs to be reduced it is important to make changes to the production process. It is the aim of the article to describe the production process changes resulting in the reduction of costs and optimal selling price. Optimal selling price can be described as the price which is acceptable for both the seller and the buyer. The article deals with the influence of technical changes on the product selling price, the company’s financial plans including the cost rationalization through changes in the production process. Methodology uses the calculation formulas showing the price creation and cover contributions of different orders. Further on, financial plans of companies are used to demonstrate the plan without the rationalization of costs, i.e. without the technical changes made and with the rationalization of costs. The assessment of the influence of changes on the product selling price is presented.
Keywords: small electric machine, calculation, contribution margin, financial plan
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