ACCA Performance Management (F5) Certification Practice Exam

Which of the following is a key advantage of cost-plus pricing?

1. Complex calculation required

2. Price stability is promoted

3. Widely used and accepted

4. Market-driven pricing strategy

The correct answer is: Widely used and accepted

The key advantage of cost-plus pricing lies in its simplicity and widespread acceptance among businesses. In a cost-plus pricing model, the selling price is determined by adding a specific markup to the total cost of producing a product. This approach is straightforward, making it easier for companies to calculate prices, estimate profit margins, and manage their costs effectively. Cost-plus pricing is also widely accepted in various industries, particularly in manufacturing and for government contracts, where clear cost structures are vital. This acceptance streamlines negotiations and provides customers with a transparent pricing structure. In contrast to complex market-driven strategies that require extensive market research and analysis, cost-plus pricing allows companies to set prices based on their internal cost data, thus fostering price stability in their pricing strategy. While other options highlight aspects that might seem beneficial, such as promoting price stability or being market-driven, these are not the principal advantages of cost-plus pricing. Instead, the strength of this pricing model lies in its accessibility and ease of use in establishing consistent pricing, making it a common choice among businesses.