When Using the Variable Cost Concept of Applying the Cost-Plus

question 30

Multiple Choice

When using the variable cost concept of applying the cost-plus approach to product pricing, what is included in the markup?

• A) total costs plus desired profit
• B) desired profit
• C) total selling and administrative expenses plus desired profit
• D) total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit

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Definitions:

Predetermined Overhead

An estimated overhead cost determined before the period begins for the purpose of allocating overhead costs to products or services in a more consistent manner.

Direct Materials

Raw materials that can be directly traced to and are integral to the finished product.

Raw Materials

Basic substances in their natural, modified, or semi-processed states used as inputs for production.

Predetermined Overhead

An estimated rate used to assign overhead costs to products or services based on a planned amount of overhead and a planned allocation base.