Joe Bergerson makes and sells maple racks for cooling cakes and cookies. Joe knows that it costs $15 to make one rack, and he wants to earn a 25 percent profit on each rack. Which approach to pricing is Joe most likely to use?
A) demand-based pricing
B) target costing
C) cost-plus pricing
D) yield management pricing
E) value pricing

Question

Quizplus · Accepted Answer

Joe is using the cost-plus pricing approach because he is adding a specific profit margin (25%) to his cost of production ($15) to arrive at a selling price for his product. This approach is commonly used by businesses to ensure that their prices cover their costs and yield a reasonable profit margin.

Joe Bergerson Makes and Sells Maple Racks for Cooling Cakes