Understanding Cost Plus Pricing

What is the primary purpose of Cost Plus pricing?

• To reduce production costs

• To compete with other businesses

• To ensure all costs are covered and a profit is made

• To set a price based on market demand

Which of the following is NOT considered a direct cost in Cost Plus pricing?

• Materials

• Manufacturing overheads

• Labor

• Rent

In the Apple iPhone 14 example, what is the profit margin if the total cost is 400 pounds and the selling price is 600 pounds?

• 66.7%

• 25%

• 33.3%

• 50%

What is one advantage of using Cost Plus pricing?

• It focuses on customer satisfaction

• It guarantees the highest possible profit

• It ensures all costs are covered by the selling price

• It automatically adjusts prices based on competition

What is a limitation of Cost Plus pricing?

• It encourages cost efficiency

• It automatically adjusts to market changes

• It considers the perceived value of the product

• It may not reflect what customers are willing to pay