What Is a Critical Reason for a Company to Use

question 19

Multiple Choice

What is a critical reason for a company to use cost-plus pricing?

• A)The company has significant differences between its variable and fixed costs.
• B)The company's suppliers have recently increased prices.
• C)The company operates in a highly competitive market.
• D)The company operates in a less competitive market.

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Definitions:

Manufacturing Capacity

The maximum amount of products a manufacturing entity can produce over a certain period of time.

Variable Manufacturing Overhead

Costs that vary with production output, such as utilities for the manufacturing plant, which are not directly tied to specific units produced.

Fixed Manufacturing Overhead

The production costs that do not vary with the volume of production, such as salaries of managers and depreciation of equipment.

Net Operating Income

The profit generated from a company's core business operations, excluding deductions of interest and taxes.