For setting long-term prices a company should use full product costs.Full product costs for pricing purposes
A)include direct costs only.
B)include all manufacturing costs only.
C)does not include fixed overhead.
D)equals manufacturing and selling costs.
E)include all direct costs plus an appropriate allocation of the indirect costs of all business functions.

Question

Quizplus · Accepted Answer

Full product costs for pricing purposes should include all direct costs (such as materials and labor) plus an appropriate allocation of the indirect costs of all business functions (such as overhead expenses). This will give the company a clear understanding of the true cost of producing and selling a product, allowing them to set prices that will cover all costs and generate profits over the long-term. Options A, B, and D are incorrect because they do not include all costs. Option C is incorrect because it excludes fixed overhead costs, which are an important part of the total cost of producing a product.

For Setting Long-Term Prices a Company Should Use Full Product