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

question 155

Multiple Choice

All of the following are disadvantages of cost-plus pricing except which one?

• 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:

Process

A continuous manufacturing operation.

SCADA System

Supervisory Control and Data Acquisition system, a computer system for gathering and analyzing real-time data to monitor and control processes.

Real Time

Describes processes or systems that operate or provide output immediately as data is input, without noticeable delay.

Set Point

The target value that a system, such as a thermostat or another control system, attempts to maintain through regulation.