just want to talk about three questions managers should answer when setting regular prices are: What...

just want to talk about three questions managers should answer when setting regular prices are:

What is the company’s target profit?

How much will customers pay?

Is the company a price-taker or a price-setter for this product or service?

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Expert Solution

1 Company's Target Profit ?

Answer: Target Price - Target Cost= Tartget Profit. , Target Price represents the maximum allowable price that can be charged for the product or service, it is an estimate of the amount that potential customers would be willing to pay based on their value perceptions.

Target Cost is the maximum unit cost , given an expected volume that a firm can commmit to a product to achiee the compnay's profit objective.

Therefore Target Profit= Target Price- Target Cost.

2. Customers will be willing to pay based on their value perceptions, their needs and expectations for products and services, quality, timelessness and price. Target price should result in an acceptable price to customers as well as an acceptable price to the organization.

3.Company is a price setter for its products and services. Pricing decisons genreally refers to the collective decisions a company makes about what to change for its products and services. There is no universally accepted method of setting prices. Yet pricing decisons can be critical in the success or failure of a business. Prices set too high tend to discourage sales, prices set too low may not cover sales. Organisatons develop price for a product or service to recoup the costs and make a desired profit.

ekkarill92 answered 11 months ago

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