Which two factors are essential components of pricing in procurement?

The essential components of pricing in procurement are deeply rooted in understanding both the sales price and the costing model. The sales price represents the amount that the buyer will ultimately pay for the products or services, while the costing model provides the framework for determining how costs are calculated, taking into account various factors such as production costs, supplier pricing strategies, and other associated expenses.

The costing model is crucial as it influences decision-making regarding procurement strategies, budgeting, and pricing negotiations. It helps organizations assess the total cost of ownership for the products they procure, ensuring comprehensive financial planning and analysis.

In contrast, other combinations like sales price and shipping cost focus on specific aspects of the procurement process rather than the foundational elements of pricing strategy. Retail price and supplier markup also miss the internal methodologies for cost analysis that are essential in procurement decisions. Similarly, while purchase volume can affect pricing through bulk discounts, it does not encapsulate the structural understanding provided by the costing model essential for informed procurement practices.