Pricing Considerations

Cost of goods sold (COGS) is the cost of the products and/or services sold to customers. In general, a retailer's cost of goods sold includes the cost from its supplier plus any additional costs necessary to get the merchandise into inventory and ready for sale. For example, assume that a bookstore purchases college textbooks from a publisher. If the bookstore's cost from the publisher is $80 for a textbook plus $5 in shipping costs, the bookstore reports $85 as a portion of the cost of goods sold.

For this Assignment, you calculate the cost of goods sold for a product. Using these calculations, you then develop a pricing strategy for the product.

To prepare:

• Review the online calculator tools provided in this week's Learning Resources.

• Select a product on which to focus for this Assignment. It may be a product that is sold by a company you work for or hope to work for.

• Using one of the online calculator tools provided in this week's Learning Resources, calculate the COGS for the product you selected.

Keep in mind that the numbers you use will be hypothetical, but be as realistic as possible when producing these estimates. Use the following guidelines:

o Make an educated guess as to what costs would be involved in producing any given number of the product you selected.

o Take into account as many costs as you can think of (e.g., manufacturing, shipping, packaging).

• Once you have calculated COGS, decide how much you want to mark up the pricing of your product in order to create the best gross margin, aligning with the price that fits your brand.

• Think about the following considerations related to your product pricing:

o What is the marketing strategy behind the pricing you decided upon?

o What is the psychology behind the pricing?

o How do you predict customers might view the pricing?