(introduction...)

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.