The Product Pricing Calculation add-in for Excel evaluates price - demand curves to find the maximum price which produces the maximum profit for any product. The user needs to supply just two datasets, demand 1 at price 1 and demand 2 at price 2. From this information the program will give you the elasticity of demand, the demand quantity at the optimum price, the strength of demand and the maximum profit.
The second part of Product Pricing for Excel works out the optimum discount price to sell unsold capacity to maximize profits.
The third part of Product Pricing for Excel supplies a costing calculator which enables you to keep track of unit costs. Use these unit cost values in the pricing calculators to calculate profit margins.
Part 1 of Product Pricing for Excel solves this equation for maximum profit value for the product: Profit for period = Total Revenues - Total Costs.
At increasing price levels: Total Revenues = the demand quantity (sales volume) * price. Total Costs = the level of demand (sale volume) * unit cost.
The Universal Product Pricing Calculation Excel add-in finds the exact Price at which: Profit for period = Quantity * Price - Total Costs = Maximum value.
The work flow for the first part of the product pricing analysis is: 1. Enter the product name and the unit costs. Use the Costing calculator to evaluate unit cost levels. 2. Enter the time period that the levels of demand and total profits are referencing. 3. Enter Quantity 1 at Price 1 and Quantity 2 at Price 2 data values into the specified input cells. 4. Both the the elasticity of demand the strength of demand are displayed. 5. The price which yields maximum profits is displayed as well as the corresponding quantity of demand at this price. 6. The Maximum Profit is displayed.
A simple way to see the relationship of price to demand to profit is to generate a Price - Demand - Profit Schedule and chart using the Schedules. A demand chart can be created by entering a starting price for the chart a few units of price behind the calculated best price value and the increments in price you wish to chart to adopt in the specified cell. The sensitivity of the price - demand - profit chart can be analyzed with each increment in price.
Changing Demand Strength The price - demand relationship shifts upwards or downwards as the overall strength of demand changes. This shift changes the Price level calculations for maximum profits. To recalculate the Price level for maximum profits as demand strength changes, the percentage change in demand can be entered to calculate a new value. The new Price level for Maximum Profits and the new demand level at this Price are then revealed. The Maximum Profit for the Period is also recalculated.
Quick Price - Max Profit Calculators for Multiple Products Use the calculator sets provided for quick calculations of Demand Strength, Demand Elasticity and the Price Point for Maximum Profits, Demand at Max price and Total Profit.
Further Features of the Product Pricing Excel add-in include:
Calculation of the discount price that will maximize profits by creating extra demand to sell spare capacity.
Calculation of unit costs by reference to employee time costs, raw material costs output efficiencies.