When Using the Functional Cost Approach to Set Selling Prices

question 59

Multiple Choice

When using the functional cost approach to set selling prices, the markup must cover:

• A) Variable costs plus a reasonable return on investment
• B) Fixed costs plus a reasonable return on investment
• C) Period costs plus a reasonable return on investment
• D) None of these are correct

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Definitions:

Region/Community Level

The scale or scope of action, planning, or analysis that focuses on broader geographic areas or groups of people united by common interests or characteristics.

Zoning Restrictions

Regulations set by local governments dictating how land within their jurisdiction can be used, affecting the location and type of business operations.

Intangible Costs

Costs that are not directly measurable in monetary terms, such as brand value, intellectual property, and customer relationships.

Factor-Rating Analysis

A method for comparing the desirability of multiple options or locations based on a set of criteria, each weighted according to its importance.