Managerial Accounting: Chapter 8 Pricing Overview
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4 Terms
What must a company do regarding its product pricing?
A company must price its product to cover its costs and earn a reasonable profit in the target market
When are prices set by the competitive market?
The formula for markup is Selling Price − Cost = Markup (Profit). In determining the proper markup, a company must consider competitive and market conditions, and the size of the markup depends on the desired return on investment for the product. Additionally, Cost + Markup = Target Selling Price
What are companies called that sell products priced by market forces?
Companies that sell products whose prices are set by market forces are called price takers.
What is the formula to determine target cost?
The calculation to determine target cost is: Target Cost = Market Price - Desired Profit.