A firm sets prices by computing merchandise, service, and overhead costs, and then adds an amount to cover its profit goals. This illustrates a
A) demand-based price strategy.
B) competition-based price strategy.
C) broad price policy.
D) cost-based price strategy.

Question

Quizplus · Accepted Answer

This is a description of a cost-based price strategy, where a firm determines its prices based on the costs of production (including merchandise, service, and overhead costs) and then adds a markup to achieve its profit goals.

A Firm Sets Prices by Computing Merchandise, Service, and Overhead