ACCA Performance Management (F5) Certification Practice Exam

Which of the following is a benefit associated with cost-plus pricing?

1. Highly flexible pricing

2. Establishes price based on perceived value

3. Easy to implement when costs are known

4. Maximizes profits through market analysis

The correct answer is: Easy to implement when costs are known

Cost-plus pricing involves determining the cost of producing a product and then adding a specific markup percentage to that cost to set the selling price. One significant benefit of this pricing strategy is its simplicity and ease of implementation, especially when production costs are well-known. Since companies can readily calculate costs, adapting a markup to arrive at a sale price is straightforward, providing a clear framework for pricing decisions. This method is particularly useful for businesses with stable and predictable costs, as it reduces the complexity often associated with market-based pricing strategies. By relying on fixed costs plus a margin, businesses can ensure they cover expenses and achieve a predetermined profit level, thus maintaining financial stability. In contrast, while flexibility in pricing and market analysis may offer benefits in specific contexts, such approaches tend to be more complex and require additional market research and customer perceptions, which can detract from the straightforward nature of cost-plus pricing. The cost-plus method does not inherently consider perceived value or market dynamics, reinforcing that its simplicity and directness are its primary advantages.