The Reasons for Using the Variable Cost-Plus Approach Include All

question 54

Multiple Choice

The reasons for using the variable cost-plus approach include all of the following EXCEPT this approach:

• A)avoids arbitrary allocation of common fixed costs to individual product lines.
• B)is more consistent with cost-volume-profit analysis.
• C)provides the most defensible bases for justifying prices to all interested parties.
• D)provides the type of data managers need for pricing special orders.

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Definitions:

Equity

The value of ownership interest in a company, typically represented by shares of stock.

External Cost

Refers to the cost that is not borne by the individual or entity causing it but by society or the environment, such as pollution.

Compensation

The total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required.

Price Mechanism

A system where the forces of demand and supply determine the prices of goods and services.