# How do I calculate the price ?

pricing - rather complicated procedure which requires an entity to account many nuances of economists.As a rule, setting a price, accounted for two main aspects:

• first - the costs incurred by an enterprise in the production of goods or the provision of services.
• second - level competition on the goods or services in a particular market segment specific region.

In current market conditions, many manufacturers of the product before, how to calculate the price, are guided by the average level of prices, or the value of the company's products, which leads to a particular segment of the market.The costs incurred for the production of products, it is very rarely taken into account by manufacturers, so it turns out that profit enterprises for the implementation of some of the goods is fabulous figures.

## price index calculation

As mentioned above, the producers in determining the prices of their goods or services to middle market prices.Calculate the average price in several ways, and one of them is the definition of the consumer price index.But at the same time, analysts use this indicator to determine the level of life in a particular region, or locality in the country.So, wondering how to calculate the price of the goods, it is necessary to know how to calculate the price index.

In order to determine whether increased or decreased the price of a particular group of products on the local or national market, is necessary to bring a certain quantity of goods at a specific price to the total cost.To begin to tailor the amount of goods and is determined by the formula on which we expect the price index.Economists today are using the Laspeyres formula, according to which the quantity of the goods is fixed at the level of the base period.

second method of calculating the price index involves using the Paasche formula, in which the quantity of the goods is fixed at the level of the reporting period.However, the second version of the calculation is almost never used since the beginning of the 90s of the 20th century, and so we will calculate the price for the Laspeyres index.It is as follows: Ip = ΣP1hQ0 / ΣP0hQ0.Before you calculate the price index, it is necessary to know that the Q in the formula - is the amount of goods and ΣP1hQ0 - cost of goods sold in the base (previous period), but at the prices of the reporting period.ΣP0hQ0 - the cost of production in the previous period.The resulting index shows how much the cost of the previous period of the goods has increased as a result of price changes in the reporting period.

## calculation of retail price

product manufacturers need to be aware that there are several kinds of prices, all of which are calculated differently.For the end user, as well as trading companies is the most important retail price, which absolutely try to calculate all aspects of pricing, ranging from the cost of goods and finishing, commercial wrap, and not only the manufacturer but also a supplier and intermediary organizations.

By the way, after calculate the price of a product could a manufacturer, taking into account their income, he releases the goods or trading company or intermediary.She turn on the selling price of the goods does cheat (its value depends on the costs incurred by the intermediary, and the profits that it determines its own).

In principle, the more additional links in the chain is called "producer - consumer", the greater will be the retail price of the goods.Therefore, the consumer, who knows how to calculate the retail price, it is clear that you must either purchase goods from producers or his representatives.Retail prices are based on market supply and demand, that is, each seller can independently determine the price of their goods.

formation of retail prices of services carried out a little differently, because there is usually no intermediate companies, except in certain cases.For example, if a firm that provides specific services can not cope on their own or the customer is willing to pay for additional services provided by the company, the retail price will be different.

## Calculation of the wholesale price

From that, how to calculate the average price of products the company could (correctly or not) depends on its profitability, which is a part of the wholesale price.Quite often confused with wholesale price selling, but between them there is a small difference - in the selling price includes excise duty.If in the price of the goods does not include excise, and the wholesale selling price of it will be the same.

wholesale price is determined by the specific costs of raw materials and wages of employees of the enterprise, on transport and other costs, so before you get your wholesale price, you need to know the size of all costs.In addition, the enterprise should plan, at what level will be its profitability, based on their goals.

Some manufacturers prefer to implement a more production units, but at a lower wholesale price.Thus, the profit of the wholesale prices for such sales unit will be less.If the company prefers to produce fewer products, but to make a profit the same as the first company, the wholesale price will be higher.

The wholesale price is included VAT, which is 18%.With regard to the cost of products (goods), something about this on our website, you can find a separate article: "How to calculate the cost price?"