What to Do: Consider the following, and then do the calculations to solve (formulas and concept explanations in the book).

Question

Your business provides a service to local residents. Your fixed costs are $2,000 per month, and you expect 40 customers per month. The variable cost associated with each service is $35.
1. Using cost-based pricing and a markup of 20%, what should the price be? Show calculations.
2. Using breakeven analysis, what should the break-even volume of production be? Show calculations.
3. Using target costing, a price you think is acceptable to customers ($99) and an acceptable profit margin (20%), what should the price be? Show calculations.
4. If your nearest competitor charges $95, what should the price be? Explain.