Which of the following statements is FALSE regarding cost-plus pricing?
A)A company selects a cost base that it regards as reliable.
B)A company uses a markup percentage that estimates a product price that covers full product costs and earns the required return on investment.
C)The selling price computed is only a prospective price.
D)The cost-plus price chosen has already been studied for customer reaction to the price.

Question

Quizplus · Accepted Answer

The cost-plus price chosen may not have been studied for customer reaction to the price. In fact, this is one of the limitations of cost-plus pricing. The selling price computed is only a prospective price and may not accurately reflect customer demand or willingness to pay.

Which of the Following Statements Is FALSE Regarding Cost-Plus Pricing