Price Adjustments

Organizations must also decide what their policies are when it comes to making price adjustments, or changing the listed prices of their products. Some common price adjustments include quantity discounts, which involves giving customers discounts for larger purchases. Discounts for paying cash for large purchases and seasonal discounts to get rid of inventory and holiday items are other examples of price adjustments.

Below is some basic vocabulary for price adjusting.

Cost: The total amount a firm pays for a product.
Retail Price: The amount a firm sells its products for.
Markup: The dollar amount added to the cost to reach the retail price.
Margin: The percent of markup. One margin point is equal to one percent markup.
Sales Price: Temporary price of a product below the retail price.
Markdown: The amount subtracted from the retail price to reach the sales price.

Discount Dollars: The dollar amount marked down from the retail price to the sales price.
Discount percentage: The percentage marked down from the retail price to the sales price.

Return on investment is one way of considering profits in relation to capital invested. ROI= [(payback-investment)/investment]*100

Price Adjustment Examples

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