Magpie Corporation uses the total cost method of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% return on invested assets of $700,000.
-Contractors who sell to government agencies would be most likely to use which of the following cost methods in pricing their products?
A)variable cost method
B)product cost method
C)total cost method
D)fixed cost method

Question

Magpie Corporation uses the total cost method of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% return on invested assets of $700,000.​  ​
-Contractors who sell to government agencies would be most likely to use which of the following cost methods in pricing their products?
A)variable cost method 
B)product cost method 
C)total cost method 
D)fixed cost method

Quizplus · Accepted Answer

Contractors selling to government agencies typically use the total cost method for pricing their products. This method includes all costs associated with the production of a good or service, ensuring that the price covers both variable and fixed costs, making it suitable for contracts where full cost recovery is important.

Magpie Corporation Uses the Total Cost Method of Product Pricing