Absolutely every business wants to earn maximum profit. However, you won’t get maximum profit if you don’t set the right selling price. This is because profit (profit) is the result of the subtraction between this value and the purchase price or cost.
So how to find the selling price per unit and what is the formula?
Definition of selling price per unit
Selling price per unit (unit price) is the amount you charge the buyer to purchase your item. In simple terms, this value can be obtained by adding the unit cost (unit cost) is the amount of profit per unit you want to earn.
But in reality, determining the selling price per unit is often not that simple. There are several factors that you should consider, including:
- unit costUnit cost is the small amount of money you sacrifice to produce a unit of good. Simply put, you get the value of this cost by adding operational and non-operating costs. Then divide by the amount of goods you produce. Operating costs here can be calculated using Cost of sales (HPP) or other methods, while non-operating expenses may include taxes and depreciation.
- Prices of similar goods from competitors. In some product categories Small differences in price can cause customers to switch from your product to a competitor’s product. Of course, this will be difficult if you are going into a related industry or publishing a related product as a product.
- price strategySelling prices can also be an attractive marketing tool. The amount of this value can change depending on the season. (high season) potential discounts Price psychology, etc. Many people assume that lowering prices will increase demand. In theory, this assumption is correct. But it’s not uncommon for consumers to view overpriced as an image of a “cheap” quality product.
- government policyThere are several government policies that can affect the selling price, such as taxes. Maximum Retail Price (HET)or highest retail price, etc. As a good citizen, Of course, you must comply with these government regulations.
- profit you want to earn. In traditional business situations Making a profit is the aim. This is because profits or gains are not just results and rewards. It also indicates the availability of additional resources that the company can use to invest. so that the company’s business can exist for a long time
unit price formula
Here are some formulas for finding selling price per unit:
1. Markup price
In this method, you determine the small profit you will receive for each product sold. The formula is:
unit price = total cost per unit + profit per unit
unit price = (total cost + total profit) / number of units produced
For example, you are an MSME making bespoke cakes and catering. One day, you receive an order for lapis cakes for 200 guests. All the production costs you need. Starting from flour, sugar, eggs, etc. is IDR 150,000 due to the long and tiring process. So you spend IDR 100,000 profit. So, unit price The correct lapis lazuli cake is:
unit price = (total cost + total profit)/ number of units produced
selling price per unit = (150,000+ 100,000)/200
The amount of this value will definitely change if you apply a price discount.
2. Margin Pricing
Determining the selling price per unit using the Margin Pricing method is similar in concept to incremental pricing. The difference is that the amount of profit required will be in terms of a percentage of the amount of costs incurred. So the formula is:
unit price = total cost per unit + (% profit * cost per unit)
For example, you have a side job as a freelance driver at a rental car company owned by your partner. With the agreement that you will be paid 15% of the total car rental and gas. Once upon a time Your colleague has been ordered to rent an Avanza to travel from Yogyakarta to Wonosobo.
Details of car rental 350000 rupees, gas cost 65000 rupees and 15% profit for you, the rental price per unit of the car is:
unit price = (350,000+65,000) + (15%* (350,000+65,000))
= 415,000 + (15% *415,000)
= 415,000 + 62,250
= IDR 477,250
3. Recommended Retail Price for Manufacturing (MSRP)
The context in determining the selling price by this method is You work as a retailer of the product. and you work with the manufacturer of that product to keep prices between retailers similar in order not to cause bad competition to each other Manufacturers of these products set a reference price (MSRP).
Retailers can sell these items above the MSRP price or below this price depending on the conditions in the channel, for example if demand is high. The price will be higher. Similarly, if the goods are piled up in the warehouse, the price will be lowered so that they can be sold quickly.
To determine the MSRP price, the manufacturer calculates the average profit that the retailer typically receives. Businesses that are most likely to use this pricing method are clothing retailers or dropshippers. or a business that buys and sells cell phones and accessories. In this case, the MSRP is determined by the clothing manufacturer you work with, so you don’t compete unfairly with other wholesalers.
Why is it important to know the selling price per unit?
It is undeniable that for most Indonesians The price factor of a product still plays an important role in determining whether or not consumers will buy a product. The selling price must be set appropriately so that it doesn’t look too cheap until consumers think that the quality is cheap and not too expensive so that customers continue to buy products.
In addition, this value directly affects the amount of profit per unit. and may affect the total profit that the company receives Excessive selling prices can result in higher total profits. (If demand is high) or may result in lower total profit if demand does not increase.
Selling price is not just buying price plus profit. The selling price is also related to marketing, competition and sustainability of the company.
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