When can using full costs for pricing decisions be justified?
A)when a firm enters into a short term contractual relationship to supply a product.
B)for development and production of customized products and contracts with the government.
C)when managers initially set prices to cover development costs and then adjust to reflect market conditions.
D)for development and production of standardized commercial products.

Question

Quizplus · Accepted Answer

Using full costs for pricing decisions can be justified when a firm is engaged in the development and production of customized products and contracts with the government. In these cases, the costs incurred are likely to be specific to the project, and not easily transferable to other products or customers. Therefore, pricing decisions must take into account the full costs incurred for the particular project or contract.

When Can Using Full Costs for Pricing Decisions Be Justified