Your company designed an ergonomic snow shovel that costs $15 to make. Your company wants to earn a 20% margin, and competitors are pricing comparable snow shovels at $17. Using the target-cost pricing strategy, how much should your company charge for the snow shovel? As the price taker, take the full cost, apply the 20% margin, and set your selling price. Meet your targeted margin by charging $16. Set the selling price at $18. O Find a way to lower the cost to $14 and sell the shovel for $17. Why is cost-plus pricing useful for setting prices of regulated services, such as power? It factors in opportunity costs. It makes the service more cost efficient. It ensures that utility companies are able to cover their costs in providing the service. It doesn't consider customer value or the market. You have an intern who is helping your team. She asked about the difference between cost-plus pricing and target-cost pricing. How would you best describe the question that is answered by a target-cost pricing strategy? How much should we charge to meet our target margin? Who is the price taker? How can we put less emphasis on the market when setting the price? How much can our product cost to produce? An artisan sells handcrafted wooden cutting boards and spoons. She acquires the wood from a variety of sources, and sometimes she is able to get a great deal on the wood. However, she charges the same price even if a batch of products has a lower cost. How is the seller engaging in price discrimination? The seller is reaching out to new customer segments. The seller is offering product differentiation for customers. The seller is incentivizing customers to buy different products. The seller isn't passing the cost advantage on to customers. You've recently switched to a new business segment within your company. Your predecessor just completed a price and margin waterfall. What should you do next? Share and discuss the price and margin waterfall with stakeholders. Find a way to increase the net price. Make sure the price and margin waterfall was created with a single product unit. Once you have one version completed, use the patterns highlighted to fix problems. Your company is setting up a price and margin waterfall. Which of the following could be used as a dimension of the y-axis? The full cost A product category The dollar per unit The net price You are stocking up for the week at your favorite grocery store. On which of the following items would you expect to see the smallest per-unit price discount? A bag of potatoes A medium-size jar of peanut butter A case of 24 cans of soda A pack of toilet paper As the former champion of your middle school's bubble gum bubble-blowing contest, you've fulfilled your childhood dream by getting a job with your favorite gum manufacturer. It is now your task to analyze the company's profitability. If the company has the consumption-adjusted margins listed below, which of the following statements describes the best next step for the company? Gum Size Unit Margins Consumption-adjusted Expansion Consumption-adjusted Margins 6-piece pack .21 .035 12-piece pack .42 32% .0462 18-piece pack .63 59% .0557 Find out which size has the greatest consumption expansion rate. Your company should offer fewer promotions on the 6-piece pack. Conduct a break-even analysis to determine how much to charge for the 12-piece pack. Market the 12-piece size because you are making the largest profit on it. Which of the following describes an incentive that could be used to resolve margin leakage in the costs of goods category of a margin waterfall? Offer a discount to a customer who sets up a recurring monthly order of the same hair products. Give a discount for a buyer who places an order online. Offer a discount to a grocery store that orders a full truckload of products rather than placing several smaller orders. Give a discount to a buyer who calls in an order rather than asking for a salesperson to make a face-to-face visit. Review: Imagine you're a product manager and need to earn a 25% target margin on your new product offering, which costs $200 for your firm to create. What is the lowest price you could set? The selling price should be $267. The selling price should be $250. The selling price should be $257. The selling price should be $307. Review: Your company is about to release new models of washers and dryers with significantly enhanced features. How might they use an auction pricing mechanism to sell as many of the current models as possible? Accept overtime bids. Before releasing the new models, drop the prices of the current models in order to target consumers who were willing to wait for a better deal. Set a fixed price based on perfect competition