Cover Image
close this bookFinancial Management of a Small Handicraft Business (Oxfam, 1988, 43 p.)
close this folderII. Pricing
View the document(introduction...)
View the documentII. 1. Value in the market
View the documentII.2. Costs and pricing
View the documentII.3. Contribution analysis


If costing is a fairly precise science, pricing is much less so. This is because the price obtainable for a product is that which the market is prepared to pay. It is of absolutely no use to complain to a customer that a product costs a certain amount to produce, if the customer perceives its value as less than that, and is not prepared to pay more.

This is not to devalue the costing exercise, which is a fundamental requirement for a production unit, and its relationship to pricing will be looked at. Nevertheless, it is necessary to separate the concept of cost from that of value. Price will ultimately be governed by the value of the product, not its cost. Where cost exceeds value, profitable selling cannot take place.