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MNE3701 ASSIGNMENT 4 SEMESTER 2 2023
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MNE3701 ASSIGNMENT 4 2023DISCLAIMER
The MNE3701 assignment 4 semester 2 2023 is a guide that help students to
answer their 4th assessment. Therefore, students can use as the document
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, MNE3701 ASSIGNMENT 4 2023
Having acquired sufficient knowledge and skills on entrepreneurship and small
business management, you must demonstrate practical competencies in
applying a pricing system and promotional planning. Think of any business you
would like to start and answer the following questions:
QUESTION 1
By using practical examples, critically discuss how you would applying a
pricing system in your business. (10)
The importance of setting a price is seen in the revenue equation in business. The
price of a product forms half of the total equation, where sales X price = revenue. A
small change in price can make a huge difference in revenue. The price therefore has
a dual influence on the total sales revenue: directly, as part of the gross revenue
equation, and an indirect impact on quantity sold. Bear in mind that because of the
complex nature of service pricing, this study unit focuses primarily on product (goods)
pricing. Because price equals total cost plus profit, a careful study of cost in a business
may keep the business from pricing too low. The concept “average pricing” is used
when the behaviour of variable and fixed cost is treated equally. Average pricing is
calculated by means of the total cost divided by the quantity sold over a certain period.
Break-even analysis
In order to develop a pricing system, an entrepreneur should understand break-even
analysis and mark-up pricing. Cost break-even analysis is used to determine the
quantity point at which the product will generate enough revenue to start showing a
profit.
Mark-up pricing
There is a difference between the mark-up on cost and the mark-up on selling price. A
farmer selling chickens incurs certain costs in raising chickens to the stage that they
are in a selling condition (e.g. food, medicine, labour and energy costs). The farmer
calculates the break-even cost and then adds a mark-up. The chickens are sold to an
intermediary (e.g. Chicken Licken). The retailer calculates his or her mark-up
percentage on the selling price of the end product, the selling price also incorporating
market demand. The following variables need to be included:
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