Holding all other things constant,an increase in fixed selling costs will affect:
A)the selling price under the absorption costing approach to cost-plus pricing.
B)the profit-maximizing price.
C)both the selling price under the absorption costing approach to cost-plus pricing and the profit-maximizing price.
D)neither the selling price under the absorption costing approach to cost-plus pricing nor the profit-maximizing price.

Question

Quizplus · Accepted Answer

Under the absorption costing approach to cost-plus pricing, fixed costs are included in the cost base, so an increase in fixed selling costs would increase the selling price. However, the profit-maximizing price is determined by marginal costs and demand, not fixed costs.

Holding All Other Things Constant,an Increase in Fixed Selling Costs