What is the difference between Standard, Cost+ and Product Pricing?

Aaron Aldrich Updated by Aaron Aldrich

In the early development of shopVOX the templates only had one type of pricing, Standards Based, meaning; you can add Material/Labor/Machine components with a cost and then add a markup on each cost to come up with individual component pricing.  Then when all of these parts are combined, you would get the price for the item you are trying to sell.

However there are several other pricing mechanisms that are common like , Cost Plus (Cost+) or Product Price; that you can use in a "Pricing Template". So let's see what these two mean.

Cost+ Pricing Cost+ pricing is a very common pricing mechanism which has been around for a long time. How this works is, you take the cost of all your components (Material/Labor/Machine) and then come up with the actual cost of the item you are manufacturing. Now to this cost you are going to add (plus) your "markup" of how much profit you want to make and add it to the "Cost" of the item. Hence this is Cost+ pricing method.

Example:  If all the costs of the components are $100, and you want to mark up this cost by 50% then your selling price will be ($100+50%*$100)= $150. So in Cost+ method you will be selling this at $150 which is 50% Markup of your cost.

Product Pricing Several other industries also use a "Fixed" price for an item, however they want to be able to pick and choose the parts that go into the end product that they sell. However the selling price does not depend on the choices they select for a given part. Hence they want to create a fixed price for a product , but use the template definition to pick the choices that the end customer want and use that information in the BOM for production purposes only, but not for pricing purposes. So in shopVOX when you define a "Product" and you pick the Pricing Type to be "Template" and you set the Price By to be "Product Price", then this price will be used by this product no matter what you add in the template, it will ignore the cost/price of the individual components (Materials/Labor/Machine) and only use this price as a fixed price.

Standard Pricing This is the default in shopVOX where for a given Product associate with a given template, you can setup the Materials/Labor/Machine rates and depending upon what is selected and the individual markup of these components the final price is calculated. The benefit of this when compared to "Cost+" pricing is it gives you the control of setting different markups for different components (Materials/Labor/Machine) vs setting one Markup for the final price in the case of cost+.

Note: "Standard Pricing" is the default in shopVOX.

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