When can using full costs for pricing decisions be justified?
A)when a firm enters into a long-term contractual relationship to supply a product.
B)when a firm enters into a short-term contractual relationship to supply a product.
C)for development and production of standardized commercial products.
D)when setting short-term market prices.

Question

Quizplus · Accepted Answer

When a firm enters into a long-term contractual relationship to supply a product, using full costs for pricing decisions can be justified. This is because the long-term nature of the contract allows the firm to consider all costs associated with production, including fixed and variable costs, and include a reasonable profit margin.

When Can Using Full Costs for Pricing Decisions Be Justified