Concept introduction:
Pricing strategies indicate the method of calculation of the price of a product or service. Some pricing strategies take cost as a basis and add a margin to calculate the price, for example, cost-plus pricing. Some pricing policies take sales price as a basis and make a target for the cost, for example, target costing.
To indicate: the meaning of cost plus pricing.
Explanation of Solution
Cost-plus pricing is one of the pricing strategies for the price of a product or service. Under this pricing method, the cost of the product or service is added with the desired margin to find the selling price of the product or service. The total cost of the product includes direct material cost, direct labor cost, and
A predetermined markup percentage is applied to the cost to calculate the markup amount. The selling price is calculated as the sum of the cost and markup.
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Managerial Accounting for Managers
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