BUS 254 Chapter Notes - Chapter 9: Opportunity Cost, Eval, Market Power

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 254
• Professor: Marco Faccone

Document Summary

Price taker = accepts price as set by competitive market. Price maker = can set the price when prod. Target cost = market price desired profit: specially made, one of a kind. I. e. designer dress, patent/copyright on unique process. When seller does not have control over prod price. Steps: find market niche, determine target price, use market research, determine target cost, incl. all prod & period costs needed to make & market prod, assemble expert team. When little/no competition, need to set own price (total cost-plus pricing) Steps: est cost base, add markup based on desired operating income/roi, target selling price = cost + (markup % x cost, markup % = desired roi per unit / total unit cost. Disadv: does not consider demand side, fc/unit changes w/ change in volume. Absorption cost-plus pricing = cost base only manu. cost. Variable & fixed s+a excluded: calculate mc/unit, calculate markup , covers roi & s+a expenses, set target selling price.