Total fixed cost plays a crucial role in pricing strategies. It is the total amount of money a business must pay to keep their operations running regardless of how many products they make or sell. This cost is considered when setting the price of a product. The price must be set in a way that it covers the total fixed cost and also generates a profit. If the price is set too low, the business may not be able to cover its fixed costs, leading to losses.
Need to evaluate the best pricing strategy for a product? This Pricing Strategy spreadsheet includes...
Download model