# ECONOMICS

## COST ACCOUNTING

### COST VOLUME PROFIT ANALYSIS

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
The following statements have been made about cost plus pricing.(1) A price in excess of full cost per unit will ensure that a company will cover all its costs and make a profit.(2) Cost plus pricing is an appropriate pricing strategy when jobs are carried out to customer specifications. Which of the above statements is/are true?
 A 1 only B 2 only C Neither 1 nor 2 D Both 1 and 2
Explanation:

Detailed explanation-1: -Cost-plus pricing is also known as markup pricing. It’s a pricing method where a fixed percentage is added on top of the cost it takes to produce one unit of a product (unit cost). The resulting number is the selling price of the product.

Detailed explanation-2: -Cost Plus Pricing is also referred to as Markup Pricing. Markup pricing or cost-plus pricing is a pricing strategy where the price of a product or service is calculated by adding together the cost of the products and a percentage of it as markup.

Detailed explanation-3: -Cost-plus pricing is a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage (a “markup") to the product’s unit cost. Essentially, the markup percentage is a method of generating a particular desired rate of return.

Detailed explanation-4: -A simple formula is cost-plus pricing = break-even price * profit margin goal. Break-even price is the total cost to the firm of producing the product or service. Profit margin goal is the firm’s desired/expected profit level. Multiply the cost to provide a service by the desired profit margin.

There is 1 question to complete.