What pricing method adds a profit amount to the cost per unit to determine selling price?

What pricing method adds a profit amount to the cost per unit to determine selling price?

• A. Product differentiation
• B. Cost-plus pricing
• C. Prototype
• D. Product portfolio

Answer: (B)

This question focuses on how selling price is set by building it up from cost with a markup. In cost-plus pricing, you start with the actual cost per unit (materials, labor, overhead) and add a set profit amount or markup to that cost to determine the selling price. This approach ensures the price covers all costs and delivers the desired profit per unit, regardless of other market factors. The other ideas relate to different business concepts rather than a pricing method: product differentiation is about making a product stand out in the market, a prototype is a first model used for testing, and a product portfolio refers to the range of products a company offers. None describe adding a specific profit amount to cost to set the price.

This question focuses on how selling price is set by building it up from cost with a markup. In cost-plus pricing, you start with the actual cost per unit (materials, labor, overhead) and add a set profit amount or markup to that cost to determine the selling price. This approach ensures the price covers all costs and delivers the desired profit per unit, regardless of other market factors.

The other ideas relate to different business concepts rather than a pricing method: product differentiation is about making a product stand out in the market, a prototype is a first model used for testing, and a product portfolio refers to the range of products a company offers. None describe adding a specific profit amount to cost to set the price.