Derek's Company Was Bidding on the Construction of a New

Multiple Choice

Derek's company was bidding on the construction of a new penguin display at a world-famous zoo. When putting together his bid, Derek began by determining what the zoo would be willing to pay for the structure, and then subtracting a reasonable profit for the company. The result would be the cost of production. For example: If price to zoo = $6 million, and company profit margin = $2 million, the cost to produce cannot exceed $4 million. [$6 million - $2 million = $4 million.] The demand-based pricing strategy in this example is called ___________.

A) target costing
B) penetration pricing
C) cost-based pricing
D) volume pricing