Diego's company was bidding on the construction of a new penguin display at a zoo. When putting together his bid, Diego began by determining what the zoo would be willing to pay for the structure, and then subtracting a reasonable profit for the company. The result would be the cost of production. For example: If price to zoo = $8 million, and company profit margin = $3 million, the cost to produce cannot exceed $5 million. [$8 million - $3 million = $5 million.] The demand-based pricing strategy in this example is called

Question

Quizplus · Accepted Answer

Target costing is a demand-based pricing strategy where the marketer first determines what the customer is willing to pay. He or she then subtracts a reasonable profit desired by the company. The remaining amount is the target cost, or the amount that costs for the product or service cannot exceed.

Diego's Company Was Bidding on the Construction of a New