In the Cost-Plus Method of Pricing, There Is One Major

question 58

Multiple Choice

In the cost-plus method of pricing, there is one major drawback that sometimes precludes exports from using it.What is this drawback?

• A)The final price may be so high that the firm's competitiveness is compromised.
• B)It is so variable that the actual price cannot be substantiated.
• C)There is high turnover of product resulting in unacceptable costing fluctuations.
• D)Each of the elements has to be examined individually, using complex structure grids.

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Definitions:

Job-Order Costing

An accounting method that assigns costs to individual units or batches of production, based on the specific jobs or orders.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.

Manufacturing Overhead

All indirect costs associated with the production process, like utilities, maintenance, and salaries for production managers.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate projected overhead costs to products or services based on a chosen activity base.