Heritage Bakeries in Oregon makes 1,000 pies per day. The total variable cost per raspberry-apple pie is $2.50. Its average fixed costs equal $.77 per pie. The company seeks a 30 percent profit over the cost of its pies so its charges $4.25 per pie. Which pricing method is Heritage Bakeries using?

Question

Quizplus · Accepted Answer

Heritage Bakeries is using cost-plus pricing, as it calculates the price by adding a profit margin (30 percent in this case) to the cost of making the pie (total variable cost plus average fixed costs).

Heritage Bakeries in Oregon Makes 1,000 Pies Per Day