A Model-Based Approach for Optimal Price Calculation of Primary Wood Products

During a period of intensive changes in the market, when profits cannot be increased by raising sales prices, companies focus on improving production processes and reducing costs. Intensified competition and business development demand improved cost tracking within companies and by individual products. Accurate calculation of product costs is crucial because the final product generates revenue and impacts its growth or decline. Introducing a new model for calculating and allocating costs per product unit aims to review the concept of fixed cost distribution in the company and the calculation of product costs to assess the profitability of This model shows that most selected products are profitable to produce. Observing overall profits for selected products, Model E is the only one that ultimately shows a gain. It provides information on the actual cost of each product, enabling the company to decide whether to produce, wait for a price change, or discontinue a product. Model E suggests dividing costs into fixed and variable, then allocating variable costs to each product’s cost. The difference between each product’s revenue and its variable costs represents the contribution margin used to cover fixed costs. Applying Model E is expected to yield better business results over time by clearly indicating which products should be supported and which should be terminated.