full-cost pricing

full-cost pricing

see COST-BASED PRICING.
Full-cost pricingclick for a larger image
Fig. 77 Full-cost pricing. The price (OP) is made up of three elements: a contribution to cover part of the firm's overhead costs (average FIXED COST) - AB; the actual unit cost (average VARIABLE COST) of producing a planned output of OQ units - BC; a PROFIT MARGIN expressed as a fixed percentage of total unit costs (average variable cost plus average fixed cost) - CD.

full-cost pricing

a pricing method that sets the PRICE of a product by adding a percentage profit mark-up to AVERAGE COST or unit total cost, where unit total cost is composed of average or unit variable cost and average or unit fixed cost. See Fig. 77 . A key element in full-cost pricing is the estimate of sales volume that is necessary to calculate average fixed cost and required unit contribution, although inevitably the price charged will itself affect sales volume. The full-cost pricing method is also called AVERAGE-COST PRICING. Although this pricing method is based upon costs, in practice managers take into account demand and competition by varying the target profit markup over time and between products. Compare MARGINAL-COST PRICING. See COST-PLUS PRICING.
References in periodicals archive ?
But the full-cost pricing system has often been criticized as a ''black box'' because of the difficulty of grasping how it actually operates, and the panel is carefully checking whether what TEPCO sees as "costs" have been appropriately calculated.
businesses, farmers, environmental not-for-profits, and government agencies, under the auspices of The Johnson Foundation at Wingspread, has taken up the call for full-cost pricing as a solution to the impending freshwater crisis, saying that society no longer can afford to treat water as a "cheap, nonstrategic, and infinitely available resource.
The book also discusses the equity aspects of full-cost pricing.
This system would involve full, tradable rights to surface water, "ownership" of groundwater, an end to federally subsidized water projects, and full-cost pricing of water delivered to users.
Introducing full-cost pricing for water together with taxes to discourage large-scale livestock concentration close to cities.
It also suggests improving animals' diets to reduce enteric fermentation and consequent methane emissions, and setting up biogas plant initiatives to recycle manure and introducing full-cost pricing for water together with taxes to discouragelarge-scale livestock concentration close to cities.
Analysts are increasingly realizing that the water needs of the future cannot be met without realistic full-cost pricing.
He further says that utilities need to look at every opportunity to close the gap, including full-cost pricing (charging customers the actual cost of the service), proper asset management, and anticipating problems before they occur.
Gox's results indicate that marginal-cost pricing dominates adaptive full-cost pricing even when resources impose soft capacity constraints.
One direct approach to full-cost pricing would be the use of impact fees or green taxes, advocated by many ecologists.
Little empirical evidence however, was found in favour of explicit marginalist behaviour in practice and after various studies during the 1930s/1940s, the theory of full-cost pricing emerged.
Full-cost pricing of raw materials would lead producers to make more socially desirable choices of materials and lead them to designs that are easier to reuse or recycle.