Price Formation
The price is formed at the market. Increasing the price, it lowers the sale volume. Increasing the publicity, it increases the sale volume. Increasing the product quality [investing in design], it increases the sale volume. In this model of tendencies we have variables: price, sale volume, publicity and product quality. Are missing variables; profit relative to the sale amount, profit relative to the employed capital and employed capital. As profit is here understood this variable under several focuses [sees below]. In this simple model, of tendencies, we have seven variables.
Cost consists of:
Production cost, bureaucratic costs, depreciation of the project [design], insurance cost, commercial costs and transport cost.
01-00Production cost
01-01Material and components
01-02Labor
01-03Energy
01-04 Depreciation of the industrial equipment
01-05 Rent of the industrial space
01-06 Allotment
Bureaucratic costs
Territorial tax
01-07Insurance costs [business risk]
Against sinister
Against commercial risk
02-00 Depreciation of the project [design] of the product
03-00 Cost of the transport
Transport Insurance Taxes [trading]
04-00 Commercial costs
Publicity Commissions
05-00 Profit consist in:
05-01 Direct taxes
Excise ect...
05-02 Profit of the company [gross]
Operational profit
Not operational profit [positive or negative]
06-00 Company profit income tax
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Taxes
Direct taxes
Company income tax
Employees Income tax
Shareholders Income tax
Tax built-in the expenses of consumption of
employees and shareholders
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To analyze the cost and the operational profit, in viable period, we needs to appeal to a fast software, for instance that described in: http://oz.pro.br/w/ . For analysis of the not operational profit we needs to appeal to the specific software of marketing. This software creates a mathematical model, starting from the statistics of the four variables:
w - price; x - sale volume; y - publicity; z - quality
And it creates a lineal model: Aw+Bx+Cy+Dz=0,
from the sampling of four up to ten competitors, of the same market. For instance: manufacturers of soft drinks, of refrigerators, of televisions, ... Each calculation is made with four competitors, to obtain four coefficients [A, B, C, D]. In the case of 'n' [more than four] competitors, forming 'm' goops of four, it obtain 'm' games of coefficients and a game of an average of these. This lineal model is exact only for small variations. Larger accuracy obtains the no lineal model: Aw+Bx+CA y^2+CBy+Dz=0. The models are less exact as larger variation. But better a model less exact than any model. With this model the software defines the variables: profit on sale amount, profit on employed capital, employed capital and it optimizes profit on employed capital.
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The taxes are analyzed to determine the integral participation of aggregate amount in the state economy.
Coffee-Break http://oz.pro.br/wc/
Download http://oz.pro.br/coffee/coffee.zip
Konstantin Otto, June, 2005 oz@oz.pro.br


About the Author
Professor of mathematics' philosophy retired
I write articles in four languages, since 1946.
More of them are specific. oz@oz.pro.br