The Cost Approach to Pricing

question 5

Multiple Choice

The cost approach to pricing:

• A)is the only defensible pricing mechanism for ethical companies to use.
• B)implies that prices are set based on the cost the market will bear.
• C)means prices are adjusted to ensure the selling organization recoups all costs.
• D)implies that cost analysis is the only technique to be used to negotiate prices.
• E)means prices are set to cover direct costs,contribute to indirect costs,and provide a profit.

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Definitions:

Time-Driven

Referring to activities or cost calculations based on the duration required to complete tasks or processes.

Customer Service

The assistance and support provided by a company to its customers before, during, and after the purchase of a product or service.

Time-Driven

An approach that bases analysis, activities, or costing on the amount of time required to complete certain tasks or processes.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to related products and services based on their consumption of resources.