Should a manufacturer's selling prices be based on costs?
Answers
Answer:
A manufacturer's selling prices should not be based on costs alone. One reason is that the actual cost of each product is not known with precision. At best, each product's cost is an average that resulted from allocations of the indirect manufacturing costs. In addition, there are selling, general and administrative expenses that are even more difficult to associate with individual products.
A more compelling reason that selling prices should not be based solely on costs is the market for a product. If a product is unique, protected by a patent and trademark, and the demand for the product is high, customers may accept a selling price that is unusually high. In other words, the value of the product is much greater than the costs identified with the product plus a normal profit or markup.
No it depends.
Explanation: