In the variable cost-plus approach, the markup percentage covers the
A)desired ROI only.
B)desired ROI and fixed costs.
C)desired ROI and selling and administrative expenses.
D)fixed costs only.

Question

Quizplus · Accepted Answer

The markup percentage in the variable cost-plus approach is calculated based on the desired ROI and fixed costs. This ensures that the selling price covers both the variable cost of production and a portion of the fixed costs, determined by the desired ROI. Separately adding overhead expenses, such as selling and administrative expenses, to the markup percentage would result in overpricing.

In the Variable Cost-Plus Approach, the Markup Percentage Covers the