The costs that actually determine the profit impact of the pricing decision are the incremental costs.

Question

Quizplus · Accepted Answer

Incremental costs are the costs that change or vary as a result of producing or selling one more unit of a product or service. Therefore, they directly impact the profit of the company and are the key factor in determining the impact of pricing decisions on profitability. Fixed costs, which do not change regardless of the level of output, are not relevant in determining the profit impact of pricing decisions.

The Costs That Actually Determine the Profit Impact of the Pricing