ACCA Performance Management (F5) Certification Practice Exam

Which factor is commonly considered in cost-plus pricing?

1. Market competition

2. Operational efficiency

3. Actual or standard costs

4. Consumer behavior

The correct answer is: Actual or standard costs

Cost-plus pricing is a pricing strategy where a company determines the cost of producing a product or service and then adds a markup to establish the selling price. The key factor in this method is the actual or standard costs involved in production. This includes the direct costs, such as materials and labor, as well as a proportion of indirect costs that contribute to the overall expense of creating the product. By focusing on these costs, a company ensures it covers its expenses while achieving a desired profit margin. This approach is particularly useful in industries with stable costs and where products are not subject to significant price competition. Moreover, the methodology of using actual or standard costs allows for a straightforward and transparent pricing structure, which can be easier for companies to manage and justify. The other factors, such as market competition, operational efficiency, and consumer behavior, while important in pricing strategies, do not play a direct role in cost-plus pricing. Market competition can influence price adjustments but is not a foundational component of the cost-plus calculation. Similarly, operational efficiency may affect costs but is not the primary consideration in determining the price benchmark under this pricing model. Lastly, understanding consumer behavior is crucial for positioning products, but it is secondary when establishing the base price through the cost-plus method. The emphasis