Q25-10RQ
Question
What is target pricing? Who uses it?
Step-by-Step Solution
Verified Answer
Answer
Target pricing is a technique or process that a business uses to compute the price of a new product based on market prices.
1Step-by-Step Solution Step 1: Meaning of Price
Price refers to the exchange cost set for a product or service. Price consists of various costs incurred by an entity to make a product and its standard profit margin.
2Step 2: Meaning and usage of target pricing
Target pricing refers to the process under which a business concern estimates the price of a product according to the competition in the market and simultaneously applies the standard profit margin to that price to achieve the maximum cost for the new product.
Selling and administration departments use target pricing.