Product cost distortion and pricing
Assume a firm relies heavily on cost-plus pricing to arrive at selling prices for its many products.
i. Define product cost distortion.
ii. Can product cost distortion ever be eliminated?
iii. Are there certain manufacturing situations in which product cost distortion is more likely? Explain.
iv. How can cost-plus pricing be improved in the situation described at the start of this question?

Question

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The Answer of Product cost distortion and pricing
Assume a firm relies heavily on cost-plus pricing to arrive at selling prices for its many products.
i. Define product cost distortion.
ii. Can product cost distortion ever be eliminated?
iii. Are there certain manufacturing situations in which product cost distortion is more likely? Explain.
iv. How can cost-plus pricing be improved in the situation described at the start of this question?

Product Cost Distortion and Pricing