You know (I wanted to say how it used to be in the USSR)"No, and now it's quite normal for many companies to build a pricing system using this approach.
We take the cost of raw materials + energy + labor + taxes + depreciation + other expenses - in total, this is our cost the product.
To all this, we add a certain percentage of profitability (this is the key feature). So we have planned the list price for our product.
Then it successfully goes to the warehouse and lies there until someone decides to buy it at such a price. It may have been lying for a year, or maybe two, and eventually they buried it there, or, at best, sold it at an illiquid price.
The costs were written off for, for example, expenses of future periods, or even better, they were thrown on non-current funds (equipment) that produce this product in order to write off these costs in portions (in the form of depreciation) for subsequent products in the near future.
And an equally important fact: all this time, money is being taken from somewhere to resume the production process. Where is the information for reflection?
I think you've got the point of the kitchen.
And now - How to choose the right price taking into account financial and economic model of your business
In the model (for those who find it difficult to understand the meaning of this word, this is a program), we normalize variable costs for all types of products and set limited costs for the entire planning period for economic elements (overhead costs). That is, we form the cost base of our business, linked to all types of products that we can produce.
We can - that's the key. It is precisely the cost-based capabilities that we assess as the production potential of our farm. It is important!
Next, we evaluate the market and form a price range for possible sales of products by various nomenclature groups and assortment.
We create scenarios for possible sales - in other words, we analyze the sensitivity of the business to all variants of the marketing program.
We put each scenario into the model and run it financial and economic calculations.
At the output, we get a profit and loss statement, balance, and cash flow.
We evaluate all scenarios and choose the economically optimal option with minimal risks in all areas.: suppliers, consumers, banks, etc., which we accept for execution.
This is exactly the right and reasonable approach in planning not only the price, but also the business economy as a whole.
