Pricing and sales.

Before a company can quote a price (or give a quotation) for goods, they must take into consideration all their costs: the production costs, shipping, insurance, etc. The total of all these costs is called the overall cost. The costing is usually done before a model is produced or exported, so the company must calculate (or work out) their overall costs in advance. From these figures they can work out the cost of each model (the unit cost). All the calculations are written on the costing sheet. The company also takes into consideration their profit. They will usually allow a profit margin of at least 10%. So when a company give a quotation for a model, they have built into the price their overall costs and profit margin.

There are other factors which affect the price of goods, for example the law of supply and demand. If a product is in demand (many people want to buy it) and not many firms can supply the product, then the company can charge a higher unit price. On the other hand, making goods in large quantities is comparatively cheaper than producing goods in small quantities. If there is a big demand for model, a company can produce it in large quantities, and they should be able to quote a lower unit price?

Two of the departments in a company which deal with pricing and selling goods are the Sales Department and the Accounts Department. The Sales staff handle the basic forms involved in selling goods' (the order and the delivery or advice note) and the Accounts staff handle the forms involved in charging for goods (the invoice and the statement). The form sent by the buyer requesting goods is the order. The form which accompanies the goods or which is sent to the buyer to tell him to expect the goods is the delivery note (or advice note). The buyer signs the delivery note which is then a receipt for the seller to prove the buyer received the goods. The Sales Department then gives the signed delivery note to the Accounts Department which sends the buyer a bill for the goods. This bill is called an invoice. Usually the Accounts Department will send the buyer an account each month which shows details of all the transactions that month. The account is called a statement. The transactions are all the invoices the seller has sent and the money received.

International trade and exchange.

When a country imports goods, it spends its currency abroad. When a country exports goods, it is paid in foreign currency. The difference between the money a country earns for goods and the amount it spends on goods is called its balance of trade (or trade balance.) Countries also trade abroad in things like insurance, tourism, foreign investment etc. which are known as invisible imports and exports. When a country receives money from abroad for things other than goods, the transaction is called an import export. When a country spends money abroad on things other than goods, the transaction is called an invisible import. The difference between the total amount of money a country spends and the total amount it earns is its balance of payments.

If a country earns more than it spends, it has a favorable balance of payments. A favorable balance of payments is also called a balance of payments surplus. If a country Spends more than it earns it has an unfavorable balance of payments. This is also called a balance of payments deficit.

In order for international trade to take place, countries have to buy and sell foreign currencies / currency. This is done on the foreign exchange market. The value of a currency on the foreign exchange market changes frequently and the price at which money can be exchanged at a particular time is called the exchange rate (or rate of exchange). The changes in the exchange rate are influenced by many political and economic factors. The value of a currency will probably fall, for example, if a country has a large trade balance deficit.

The exchange rate can affect the price of exported goods. If the value of the exporter’s currency falls (or takes a fall) he will make more profit. On the other hand, if the value of the foreign currency takes a fall, the exporter may have to raise his prices abroad in order to make a profit. Alternatively the exporter can take Out forward exchange cover. Forward exchange cover is a form of insurance. The exporter arranges to sell forward (e. g. in three months time) at an agreed rate of exchange the foreign currency he will receive from the sale of goods. This guards the exporter against losing money if the foreign currency falls in value.