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