In a Cost-Plus Approach to Pricing

question 73

Multiple Choice

In a cost-plus approach to pricing:

• A) there is an inverse relationship between the magnitude of the cost basis and the markup percentage.
• B) there is a direct relationship between the magnitude of the cost basis and the markup percentage.
• C) the cost basis used must include fixed manufacturing overhead.
• D) "plus" refers to the addition of allocated administrative overhead to the direct manufacturing costs.
• E) "plus" refers to the addition of allocated fixed manufacturing overhead to the variable manufacturing costs.

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Definitions:

Functional Currency

The currency of the primary economic environment in which an entity operates, used in its financial reporting.

Primary Economic Environment

The main economic setting in which a company operates and carries out its operations, often determined by its reporting currency and major market.

Local Overseas Currency

The official money or legal tender used in a country other than one's own, especially in the context of international trade or travel.

Functional Currency

The currency of the primary economic environment in which an entity operates, and in which it typically generates and expends cash.