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Pricing Models and Optimum Pricing

Businesses typically exist to maximize profit. It means that revenues must exceed the costs associated with producing a product or providing a service in addition to covering administrative costs. Therefore, determining the price of a product or service is crucial. There are many models or approaches to determining price for a product or service. Below find two models.

Target costing is a method where costs and margins are determined ahead of time. If a product or service cannot meet these objectives, it is deemed not to be viable.

Optimum selling price is a strategy that compares a company's products or services to similar ones in the market place.

Discuss one or both of the above approaches and provide examples of companies or products that fit at least one of the two above categories. Can you think of a third approach used by businesses?
Please, provide information (not merely opinions) backed up by details or examples. Your comments should be in your own words and Include references in APA format.

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In compliance with BrainMass rules this is not a hand in ready assignment but only guidance.
Optimum selling price means the company compares its products and services to similar ones in the market place. In this context, the optimal price and volume is determined at the point where the company maximizes its profits. This information can be found out through the pricing and product strategy of competitors in the market.
Target costing on the other hand means costs and margins are determined before time. If a product or service cannot satisfy these objectives, the strategy is not viable. The target cost is the highest cost that can be incurred on a product and with which ...

Solution Summary

This solution discusses pricing models.