Question

In using the variable cost concept of applying the cost-plus approach to product pricing, variable manufacturing costs and variable selling and administrative expenses must be covered by the markup. 1) True 2) False

Answer 1

Answer:

True

Explanation:

In the variable cost concept, all the variable manufacturing cost should be covered in the markup for product pricing. The Cost-plus approach determines the pricing of the product by adding the cost of the product whether buying or Manufacturing in the required markup.

In a cost-plus approach under variable

Price of the product = Variable costs + Markup

Price of the product = ( Material cost + Labor cost + Variable manufacturing cost + Variable selling and administrative cost ) + ( Total variable cost x Markup rate )