ACCA Performance Management (F5) Certification Practice Exam

In cost-plus pricing techniques, the selling price is determined by which formula?

1. Price = cost per unit - chosen margin/mark-up

2. Price = cost per unit x chosen margin/mark-up

3. Price = cost per unit + chosen margin/mark-up

4. Price = cost per unit / chosen margin/mark-up

The correct answer is: Price = cost per unit + chosen margin/mark-up

In cost-plus pricing techniques, the selling price is determined by adding a specific margin or mark-up to the cost per unit. This approach ensures that all costs associated with producing the product are covered while also providing a profit margin set by the business. The formulation Price = cost per unit + chosen margin/mark-up accurately reflects this methodology. By adding the chosen margin or mark-up directly to the cost of production, businesses can set a price that not only recoups the expenses incurred but also generates profit. This technique is straightforward and commonly used across various industries for pricing products and services. Other options may involve incorrect mathematical operations. For instance, subtracting the margin or using multiplication and division inappropriately would not yield a price that incorporates both costs and the desired profit. The simplicity and effectiveness of adding a mark-up to the cost makes option C the correct choice in this context.