What Cost Concept Used in Applying the Cost-Plus Approach to Product

question 28

Multiple Choice

What cost concept used in applying the cost-plus approach to product pricing includes only total manufacturing costs in the "cost" amount to which the markup is added?

• A) Variable cost concept
• B) Total cost concept
• C) Product cost concept
• D) Opportunity cost concept

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Definitions:

Overhead Rates

Ratios used to allocate indirect costs to products or services, based on a predetermined activity base such as labor hours or machine hours.

Machine-Hours

A measure of production time, referring to the total hours that machinery is operated in the manufacturing process.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead to products based on a certain activity base.

Customizing Department

A specialized department in a company that modifies products to meet specific customer requirements or preferences.