MANAGERIAL ACCOUNTING W/CONNECT
15th Edition
ISBN: 9781259732454
Author: Garrison
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter AA, Problem 1Q
To determine
Concept Introduction:
Cost-plus pricing: Cost-based pricing is the simple cost-based pricing method to determine the prices of goods or services.
To define:
The cost-plus pricing method.
Expert Solution & Answer
Explanation of Solution
Cost-plus pricing is the simple cost-based pricing method to determine the prices of goods or services. Under this method, first add the direct material cost, the direct labor cost and the
There are 3 steps to calculate the cost-plus pricing:
Step 1: Calculate the total cost of the product or service which is the sum of variable cost and fixed cost.
Step 2: Divide the total cost as calculated in step 1 by the number of units to calculate the cost per unit.
Step 3: Multiply per unit cost by the required markup percentage to compute the selling price and profit margin per unit of product.
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