Why Is Cost-Plus Pricing Criticized

question 119

Multiple Choice

Why is cost-plus pricing criticized?

• A)It includes selling and administrative costs in determining the product cost.
• B)It does not consider the fixed manufacturing overhead in determining the product cost.
• C)It is inherently circular for manufacturing firms.
• D)It requires a high level of technical expertise to price products using this method.

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Definitions:

Maslow's Hierarchy

A theory in psychology proposed by Abraham Maslow that outlines a five-tier model of human needs, from physiological needs at the base to self-actualization at the top.

Step-By-Step Sequence

An ordered series of actions or stages that lead to achieving a specific goal or completing a process.

Alderfer's ERG Theory

A motivational theory presented by Clayton Alderfer that categorizes human needs into three groups—Existence, Relatedness, and Growth—which influence individual behavior.

McClelland's Acquired Needs Theory

A motivational theory suggesting that individuals are driven by three main needs: achievement, affiliation, and power, which they acquire over time.