Name:
Class:
Purpose: pricing decisions will form a key part of the firm’s overall marketing strategy.
Instruction: in this activity, you need to use cost-plus pricing to do Q1. For Q2, your task is to
identify why the firm has adopted their particular pricing approach.
Q1. Use cost-plus pricing method to set the price if
-you expect to sell 1,000 units and you want a 50% mark-up:
-you expect to sell 2,000 units and you want a 33% mark-up:
No. of
Allocated
Variable
Total
Average
Units
Fixed
Cost/Unit
Production
Unit Cost
Costs
Unit Price
Cost
500
$10,000
$10
1,000
$10,000
$10
1,500
$10,000
$10
2.000
$10,000
$10
2,500
$10,000
$10
(a)Start by completing the above table.
(b)For which types of business would this pricing approach be the most suitable?
(c)What concerns would you have with using this pricing approach?
Total
Gross
Sales
Profit
Revenue
Name:
Class:
Q2. Identify why the firm has adopted their particular pricing approach
a) When ‘Great Cuts’ (haircuts) originally opened, they charged just $12 per haircut. However,
since they have become widespread and more popular, they have progressively increased
their price to over $20 per haircut.
b) Flip-flop restaurant has enjoyed a steady flow of customers, including many repeat ones
over several years. However, Flip-flops has decided to close in three months’ time in order to
redevelop the site for home units. Therefore, they have decided to increase the average price
of main meals from $15 to $25 until the restaurant closes.
c) Mercedes prefer to maintain high prices, even though they could afford to discount or
reduce prices at times.
d) Many McDonald’s stores offer a 40c ice-cream cone.
e) Some supermarket chains use limited price discounting, instead preferring to use everyday
low pricing.
f) Many loyalty schemes are expensive to run and it is mainly those customers who heavily
use the schemes receive any significant benefit.
g) Many department stores will have large sales in January. This is designed to clear stock and
ensure good sales levels in a traditionally quiet sales month.
1. Identify the pricing strategy adopted by each firm and why these firms have adopted
these pricing tactics.
2. In what circumstances would a firm price a product at a break-even or even a loss point?
3. What role does price play in a firm’s overall image/positioning?
4. Describe which strategy, market skimming or market penetration, the following
companies use in the pricing their new products and services: (*online research is
suggested for answering this question)
a) Jetstar
b) Sony
c) Cadbury Schweppes
5. Are these the right strategies for these companies to increase profit? Why or why
not?
-2001 paper Q3, Q7 Identify pricing method
-2006 Q27 evaluate the importance of pricing strategies for effective profitability
management
-2011 Q24 (c) discuss one pricing strategy that owners could use to attract customers
Check out the questions in the past HSC paper at
http://www.boardofstudies.nsw.edu.au/hsc_exams/papers.html
http://www.boardofstudies.nsw.edu.au/hsc_exams/hsc2011exams