why do we mean by full cost pricing and why is it important

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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why do we mean by full cost pricing and why is it important

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Full cost pricing is a strategy where the price of the product is estimated by the firm based on the direct costs per unit of output along with markup to cover overheads profits and costs. It is a method of pricing in which the seller directly includes direct labor cost, administrative costs, direct material cost, and overhead cost for a product and add it to markup percentage to derive the price of the product. Such a method is mainly used in situations where services and goods are provided based on the particular requirement of the customer. . Therefore there will be less completion and no product with standardization being provided. It is sometimes also used to set prices for the long term which are sufficiently high to ensure a profit This method requires good research of the market structure.

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