When determining the markup to be used in a cost-plus pricing formula, many companies base the markup on a target:
A) return on investment.
B) sales margin.
C) capital turnover.
D) earnings per share.
E) debt-to-equity ratio.

Question

Quizplus · Accepted Answer

Companies often use a target return on investment (ROI) as the basis for determining the markup in a cost-plus pricing formula. This approach helps ensure that the price set for a product or service will allow the company to achieve its desired return on the capital invested in the project or product.

When Determining the Markup to Be Used in a Cost-Plus