One pitfall of cost-plus pricing for the buyer is that the seller may increase costs to establish a larger profit base.

Question

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Cost-plus pricing involves adding a markup percentage to the actual production cost to determine the selling price. However, if the seller increases the production cost, the markup percentage gets added to a larger number, resulting in a higher selling price. This can be a potential pitfall for the buyer as they may end up paying more for the product due to the seller's increased costs.

One Pitfall of Cost-Plus Pricing for the Buyer Is That