Principles of Marketing

ACTIVITY TITLE: Price Calculation - Target Profit Pricing As the term suggests, target profit pricing is designed to determine how many units we will need to sell to both cover MARKET costs and achieve a set profit. In some firms, marketers are allocated a profit contribution goal/target for the year, and they ASSESSMENT! will use this approach to estimate the required sales volume. Work through the following two examples to gain a better understanding of this approach. TASK: Using target pricing analysis: 1. How many units need to be sold to generate a P30,ooo profit if the price is Pgo? 2. How many units need to be sold to generate a $30,000 profit if the price is P20? No. Allocated Variable Total Average Unit Total Gross of Fixed Cost/Unit Production Unit Price Sales Profit Units Costs Cost Cost Revenue 500 P10,000 P10 1,000 P10,000 P10 1,500 P10,000 P10 2.000 P10,000 PIO 2,500 P10,000 P10 QUESTIONS: 1. Start by completing the above table. 2. Why would this pricing approach be particularly important to a marketer? Why? 3. Does this approach take into account likely market demand