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2014 Pricing Your Food Product
2014 Pricing Your Food Product
2014 Pricing Your Food Product
Product
Module designed by Tera Sandvik, LRD, Program
Coordinator; Julie Garden-Robinson, PhD, LRD,
Food and Nutrition Specialist;and Kathleen Tweeten,
MBA, Director, Center for Community Vitality,
Community Economic Development Extension
Specialist; Module updated in 2014 by Kimberly
Beauchamp, Food Safety/Food Entrepreneur
Extension Specialist.
2014
The following tips will help you
navigate through each module.
Click the left mouse button or the down arrow
to continue on to the next bullet or slide.
Fixed costs
Variable costs
Fixed Costs
Fixed costs are expenses that must be
paid no matter how many goods or
services are offered for sale.
http://www.dinkytown.net/java/BreakEven.ht
ml
In case you forgot:
Variable cost = 2.50
Fixed cost = 500
Price per unit = $5
Hint: Expected unit sales is anything greater than 1.
In the previous examples, the break even point
was 200 units.
Profit
Go to:
http://www.dinkytown.net/java/BreakEven.html
For example:
Variable cost = $200 for 15 units sold
Variable cost = $215 for 16 units sold
Marginal cost difference = $15
The difference between variable costs
Marginal cost
Go to: http://hspm.sph.sc.edu/Cost.html
for a more in-depth, interactive
explanation about marginal costs.
Remember to come back after exploring
the Web site.
What is marginal cost?
A. The change in cost that results from
changing the output by one unit
B. The cost of overhead
C. The charge for permanent part-time
labor
D. None of the above
$1,000/50 = $20
$20 x 130% = $26
The selling price should be $26.
Cost-based pricing
$2 x 2.5 = $5
You should sell the
sandwich for $5.
figure out percent food cost
pricing?
A. Cost of labor
B. Kitchen remodeling cost
C. Insurance cost
D. Food cost
For example:
A competitor charges $100 for a cake. As a result of
using this pricing method you charge $120. To prevent
losing customers to the cheaper business, upgrade your
service to include delivering the cake.
The extra quality in the service may require slightly
longer hours, but it will compensate for the higher price.
Use the working-back pricing method
in the following example.
You sell 200 products each month.
Total cost = $500
You want a 50% profit
What should your selling price be?