Question

In ________ pricing, companies set the prices that consumers pay for products.

Answer 1

In business, companies use cost-based pricing to set the prices that consumers pay for products. This pricing strategy takes into consideration the cost of production and the desired profit margin.

Step-by-step explanation:

In business, companies use cost-based pricing to set the prices that consumers pay for products. This pricing strategy takes into consideration the cost of production and the desired profit margin.

Here's a step-by-step explanation:

1. Calculate the total cost of production, which includes expenses such as raw materials, labor, and overhead.
2. Determine the desired profit margin or mark-up percentage that the company wants to achieve.
3. Add the desired profit to the total cost of production.
4. Divide the total by the expected quantity of products to be sold.
5. This will give you the price per unit that the company will set for the product.

For example, if the total cost of production is $10,000 and the desired profit margin is 20%, the company wants to make $2,000 in profit. If they expect to sell 1,000 units, the price per unit would be $12 ($10,000 + $2,000 = $12,000 divided by 1,000).