Holding all other things constant, an increase in the company's required return on investment (ROI) will affect:
A)the selling price under the absorption costing approach to cost-plus pricing.
B)the profit-maximizing price.
C)both the selling price under the absorption costing approach to cost-plus pricing and the profit-maximizing price.
D)neither the selling price under the absorption costing approach to cost-plus pricing nor the profit-maximizing price.

Question

Quizplus · Accepted Answer

An increase in the company's required ROI will increase the markup in cost-plus pricing, thus affecting the selling price under the absorption costing approach. However, it does not directly affect the profit-maximizing price, which is determined by demand and marginal cost.

Holding All Other Things Constant, an Increase in the Company's