Which of the following statements is true regarding cost-plus pricing?
A) It starts with a target price which is the estimated price for a product.
B) A company uses a markup percentage that estimates a product price that covers full product costs and earns the required return on investment.
C) It first determines product characteristics and target price on the basis of customer preferences and then computes a target cost.
D) The cost-plus price chosen has already been studied for customer reaction to the price.

Question

Quizplus · Accepted Answer

Cost-plus pricing involves adding a markup on top of the total cost of the product to arrive at the selling price. The markup percentage is chosen by the company and is based on the desired return on investment. Therefore, option B is the correct statement. Option A refers to target costing, option C refers to value-based pricing, and option D refers to price testing.

Which of the Following Statements Is True Regarding Cost-Plus Pricing