Cost-based pricing for learning organizations – a model presentation and demonstration

A price can be set in different ways for a manufactured component, most commonly based on estimated manufacturing costs, market intelligence, and market adopted pricing or customer value. Pricing is one of the key factors when selecting subcontractors in the manufacturing sector. As a subcontractor, there are certain risks connected with pricing of a product, too low pricing leads to losses, whereas too high pricing can result in failure to receive orders. A model for cost-based pricing is developed and presented based on a cost-breakdown approach. Data from industry is used for both model demonstration and analyses of data accuracy.