In using the total cost concept of applying the cost-plus approach to product pricing, what is included in the cost amount to which the markup is added?
A) Total selling and administrative expenses plus desired profit
B) Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
C) Total costs of manufacturing a product plus selling and administrative expenses
D) Total variable manufacturing costs, total variable selling and administrative expenses, and desired profit

Question

Quizplus · Accepted Answer

The total cost concept includes all costs necessary to manufacture a product, plus any additional selling and administrative expenses. This approach ensures that all costs are covered and a desired profit is achieved. Option A only includes selling and administrative expenses and desired profit, while option B includes fixed costs instead of total costs. Option D only includes variable costs and not all costs necessary to manufacture a product.

In Using the Total Cost Concept of Applying the Cost-Plus