All of the Following Are Disadvantages of Cost-Plus Pricing Except

question 44

Multiple Choice

All of the following are disadvantages of cost-plus pricing except

• A)it ignores the price elasticity of demand: for example, it may be possible to increase profits by raising or lowering price.
• B)if the industry comprises identical firms (with identical costs), markups could be consistent among firms leading to no one firm having a competitive edge in terms of price.
• C)allocating and apportioning business overheads to individual products could be somewhat arbitrary.
• D)the business has less incentive to cut or control costs: if costs increase, then selling prices increase. Consequently, this might further erode a firm's competitiveness.

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Definitions:

Penalties

Punishments or fines imposed for breaking a law, rule, or contract.

Inflation-adjusted Amount

A monetary value converted to reflect changes in purchasing power due to inflation, ensuring comparison over time is more accurate.

Registration Statement

A set of documents, including financial statements and a prospectus, filed with a securities regulatory body to register new securities for public sale.

CFO

Chief Financial Officer, an executive responsible for managing the financial actions of a company.