All of the following are disadvantages of cost-plus pricing except
A)It ignores the price elasticity of demand: for example, it may be possible to increase profits by raising or lowering price.
B)If the industry comprises identical firms (with identical costs), markups could be consistent among firms leading to no one firm having a competitive edge in terms of price.
C)Allocating and apportioning business overheads to individual products could be somewhat arbitrary.
D)The business has less incentive to cut or control costs: if costs increase, then selling prices increase. Consequently, this might further erode a firm's competitiveness.

Question

Quizplus · Accepted Answer

While A, C, and D are all valid disadvantages of cost-plus pricing, B is not a disadvantage. Consistent markups among firms could lead to price competition based on other factors like quality or customer service, but it does not make cost-plus pricing inherently disadvantageous.

All of the Following Are Disadvantages of Cost-Plus Pricing Except