Ponce Company is considering the production and sale of a new product with fixed costs of $27,000 and variable cost of $5 per unit. Based on its normal profit margins, Ponce desires to earn a $33,000 profit and believes it can sell 6,000 units of the product.
a. Based on this information, determine the target sales price.
b. Explain how prestige pricing could be used to increase profitability.