"Edwin Pawlowski" wrote in message
news

"Todd Fatheree" wrote in message
Well, it doesn't much matter what you (or I) think. In a capitalist
economy, that's the way it works. The market doesn't give a damn about
how
much your costs are, so there isn't any point in using that as a
starting
point to arrive at price. If you want to enlighten us on why that is
wrong,
feel free.

The market will determine the selling price, but if you don't know your
costs, you can be in big trouble very fast. I've seen big companies sell
products at what the market demands and they no longer exist. If you know
your costs, know that selling price is less than cost, you find a new
product before it is too late. The market price for some items my company
makes has been driven down very low. We decided to no longer participate.
Our largest competitor (in that market) had a big grin as they gobbled up
most of the business. Two weeks ago they closed the doors. Suddenly, the
market does care about our costs and is willing to pay more.

I never said you shouldn't know your costs. In my first post in this
thread, I said you had to know your costs to be able to calculate profit to
determine if the product is worthwhile for you financially. Hint: the
market still doesn't care about your cost. It's reacting to a change in the
competitive landscape. If your material cost went up 10% tomorrow, could
you just tack on 10% to your price? If you gave your employees a 25% raise
could you increase your product price commensurately? I doubt it. If
someone else came along next week willing to sell the product for the same
price your competitor was selling it at (albeit at a loss), where do you
think the market would set the price? Presto, once again the market doesn't
care what your costs are. Would the other company be foolish to do so?
Probably, but the market doesn't care.

todd