Which of the Following Statements Is True Regarding Cost-Plus Pricing

question 3

Multiple Choice

Which of the following statements is true regarding cost-plus pricing?

• A) It starts with a target price which is the estimated price for a product.
• B) A company uses a markup percentage that estimates a product price that covers full product costs and earns the required return on investment.
• C) It first determines product characteristics and target price on the basis of customer preferences and then computes a target cost.
• D) The cost-plus price chosen has already been studied for customer reaction to the price.

---

Definitions:

Risk Premium

The additional return expected for holding a risky investment over a risk-free one.

Long Bonds

Bonds with a long duration, typically more than ten years, that are subject to higher interest rate risks but potentially offer higher yields.

Period

A length of time during which a series of events or an action takes place or is completed.

Total Percentage Return

The total return on an investment, expressed as a percentage, accounting for all forms of earnings including dividends, interest, and capital gains.