When estimated costs are used in applying the cost-plus approach to product pricing, the estimates should be based upon ideal levels of performance.

Question

Quizplus · Accepted Answer

Estimated costs used in applying the cost-plus approach to product pricing should be based on realistic levels of performance and not ideal levels. Ideal levels of performance may not be achievable in reality, leading to inaccurate cost estimates and potentially resulting in incorrect pricing decisions.

When Estimated Costs Are Used in Applying the Cost-Plus Approach