Question

How is price determined using​ cost-plus pricing? A. The price is set by determining the​ customer's value perceptions. B. The price is set based on demand. C. The price is set so that total revenue covers total costs. D. The price is set by adding a standard​ mark-up to the cost of the product. E. The price is set based on​ competitor's prices.

Answer 1

The correct answer is option D.

Step-by-step explanation:

The cost-plus pricing is a method of price determination. The price is fixed by adding a standard markup to the cost of the product.

We sum up the direct material cost, the labor cost and the overhead cost of a product. Then we add a certain percentage of markup to arrive at the selling price of the product.

An alternative to cost-plus pricing is value-based pricing.