When Estimated Costs Are Used in Applying the Cost-Plus Approach

question 115

True/False

When estimated costs are used in applying the cost-plus approach to product pricing, the estimates should be based upon normal levels of performance.

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Definitions:

Direct Materials

Ingredients that are specifically identifiable in the creation of a certain product.

Direct Labor-Hours

The broad sum of hours dedicated by workers directly in the manufacturing workflow.

Variable Overhead

Indirect production costs that vary with the level of output, such as utilities for a manufacturing plant.

Direct Materials

Raw materials that can be directly attributed to the production of finished goods.