In Using the Variable Cost Concept of Applying the Cost-Plus

question 162

True/False

In using the variable cost concept of applying the cost-plus approach to product pricing, fixed manufacturing costs and both fixed and variable selling and administrative expenses must be covered by the markup.

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Definitions:

Marginal Cost

The financial outlay involved in the manufacture of one more unit of a product or service.

Monopoly Power

The capacity of a firm to control market prices and exclude competition, often by being the sole provider of a product or service.

Barriers to Entry

Barriers that make it difficult for new entrants to join a market or business sector.

Average Total Cost Curve

Depicts the per-unit total cost of production (fixed cost plus variable cost) divided by the quantity of output produced.