Saturday, October 3, 2009

Universal Pricing Calculations for Excel

The Universal Pricing Excel Spreadsheets calculate price - demand relationships and uses standard accounting formula to give you the exact price which will produce the maximum profit for any product.

The user supplies two datasets, demand1@price1 and demand2@price2.
  • The program calculates elasticity of demand (change in demand for $1 change in price) and the price which yields the maximum profit
  • The second part of the program calculates discount price required to create additonal demand that will sell unused spare capacity or stock at maximum profit.
  • The third part of the program supplies a costing calculator for Excel. Input these unit cost values in the pricing calculators.
Excel finds the exact Price which maximizes this standard profit formula:

Profit for period = Demand*Price (Revenues) - Demand*Unit Costs = Maximum value.

An easy way to understand the relationship of price - demand - profit for any product is to use the program to drive the Price - Demand - Profit schedule and charts provided. You will see that as prices start to rise in the chart, profits increase, reaching a maximum plateau, then decline as demand falls away. The program calculates the maximum price point of any product curve that produces the maximum profit

The Excel costing calculator works out unit product costs for the optimum pricing - profit calculations.