The lower price limit specifies the offer price as the net sales price that a company must at least demand in order to survive. To determine it, one uses the contribution margin calculation. When determining the lower price limit, it is assumed that the company will bring the products it offers to customers at essentially the same price.
Cost-oriented lower price limit
the cost-oriented lower price limitthat can be determined for one-product companies. In the short term, it is the variable costs caused by the product. In the long term, it also includes the fixed costs that can be influenced in the long term by building up and reducing capacities and making them more rational.
Success-oriented lower price limit
the success-oriented lower price limitwhich is important for multi-product businesses. In the short term, in the case of underutilized capacities, it is the variable costs. When the company is full, the opportunity costs are added, which reduce the contribution margins as a result of the displacement of previously manufactured product types. In the long term, the long-term lower price limit includes the variable and fixed costs.
Liquidity-oriented lower price limit
the liquidity-oriented lower price limitwhich includes the minimum costs to be covered to cover willingness to pay. That is the sum of the short-term expenditure-effective fixed costs and the variable costs.
The determination of the liquidity-oriented lower price limit is linked to a large number of requirements, e. B. that all manufactured products are sold and also lead to payments in the same period. In addition, the material consumption must be valued at the purchase price. It is assumed that the possibilities of raising liquid funds have been exhausted.