Target Return Pricing

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Target-Return pricing
Here, the firm determines the price that would fetch its target rate of return on investment.
As per this method, the selling price can be determined by using the formula
 =  Unit cost  +
For example, a manufacturer has invested Rs. 1,00,000 and is expecting a return of 20%. The cost of the product is assumed to be Rs. 80 per unit. He expects to sell 1,000 units. Here, the target return price can be calculated as :
Target return price = 80 +
= 80 +
= 80  + 20
= Rs. 100/- per unit

 

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