Which of the Following Is True of the Full-Cost Pricing

question 58

Multiple Choice

Which of the following is true of the full-cost pricing approach?

• A) In this approach, any contribution to fixed cost after variable costs are covered is profit to the company.
• B) In this approach, the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.
• C) In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin.
• D) This approach is a practical approach to pricing when a company has high fixed costs and unused production capacity.
• E) This approach insists that each unit of a similar product is treated differently in terms of cost.

Recognize the value chain components relevant to different types of entities (merchandising, professional services).

Understand the characteristics and classification of service entities.

Comprehend the concepts of service and merchandising value chains.

Identify and classify costs associated with service entities.

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Definitions:

Division Of Labor

The allocation of different parts of a manufacturing process or task to different individuals or groups to improve efficiency and productivity.

Production

The process of combining various inputs like labor, capital, and raw materials to make goods or provide services.

Proprietor's Income

The income earned by the owner of a sole proprietorship from the business.

Restaurant

A business establishment where meals or refreshments can be purchased and consumed by patrons.