When using the product cost concept of applying the cost-plus approach to product pricing what is included in the markup quizlet?

Terms in this set (12)

In using the VARIABLE COST CONCEPT of applying the cost-plus approach to product pricing, what is included in the MARKUP? Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit.

What pricing method is used if all costs are considered and a fair mark up is added to determine the selling price?

Cost-plus pricing
Cost-plus pricing, also called markup pricing, is the practice by a company of determining the cost of the product to the company and then adding a percentage on top of that price to determine the selling price to the customer.

What is total cost concept?

Total cost refers to the total expense incurred in reaching a particular level of output; if such total cost is divided by the quantity produced, average or unit cost is obtained. … Variable costs, like the costs of labour or raw materials, change with the level of output.

Which of the following is an example of a factory overhead cost?

Examples of manufacturing overhead costs are: Rent of the production building. Property taxes and insurance on manufacturing facilities and equipment. Communication systems and computers for a manufacturing facility.

When estimated costs are used in applying the cost plus approach to product pricing?

When estimated costs are used in applying the cost-plus approach to product pricing,the estimates should be based upon ideal levels of performance.

When using the total cost concept of applying the cost plus approach to product pricing what is included in the market?

Cost plus pricing involves adding a markup to the cost of goods and services to arrive at a selling price. Under this approach, you add together the direct material cost, direct labor cost, and overhead costs for a product, and add to it a markup percentage in order to derive the price of the product.

What are variable costs?

A variable cost is a corporate expense that changes in proportion to how much a company produces or sells. Variable costs increase or decrease depending on a company’s production or sales volume—they rise as production increases and fall as production decreases. … A variable cost can be contrasted with a fixed cost.

Is factory overhead a variable cost?

Some manufacturing overhead costs, which are also referred to as indirect factory costs, are variable. A common example of a variable overhead cost is the electricity used to operate factory equipment. … There will also be less total electricity cost when the equipment produces fewer units of output.

How do you calculate variable manufacturing overhead?

Standard Variable Manufacturing Overhead

For example, if variable overhead costs are typically $300 when the company produces 100 units, the standard variable overhead rate is $3 per unit. The accountant then multiplies the rate by expected production for the period to calculate estimated variable overhead expense.

Which of the following costs is a variable cost?

Variable costs may include labor, commissions, and raw materials. Fixed costs remain the same regardless of production output. Fixed costs may include lease and rental payments, insurance, and interest payments.

What are some examples of variable cost?

Variable costs are costs that change as the volume changes. Examples of variable costs are raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees. In some accounting statements, the Variable costs of production are called the “Cost of Goods Sold.”

What is variable cost formula?

Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this: Total Variable Costs = Cost Per Unit x Total Number of Units. … So, you’ll need to produce more units to actually turn a profit.

What are fixed and variable costs examples?

Fixed costs are time-related i.e. they remain constant for a period of time. Variable costs are volume-related and change with the changes in output level. Depreciation, interest paid on capital, rent, salary, property taxes, insurance premium, etc. Commission on sales, credit card fees, wages of part-time staff, etc.

What is variable cost and marginal cost?

Marginal costs are a function of the total cost of production, which includes fixed and variable costs. Fixed costs of production are constant, occur regularly, and do not change in the short-term with changes in production. … By contrast, a variable cost is one that changes based on production output and costs.

How do you determine fixed and variable costs?

Take your total cost of production and subtract your variable costs multiplied by the number of units you produced. This will give you your total fixed cost.

Why are fixed and variable costs important?

In short, knowing and managing variable costs is essential as you respond to changes in the marketplace and in your company’s growth patterns. A solid understanding of your company’s fixed and variable costs is what allows us to identify the profitable price level for its products or services.

What are variable costs fixed costs and mixed costs?

Fixed costs remain the same no matter how many units you produce or sell. Variable costs are directly tied to your sales and production. They fluctuate as your output increases and decreases. Mixed costs are a combination of your fixed and variable costs.

Are variable costs relevant?

Variable costs are relevant costs only if they differ in total between the alternatives under consideration. … Not all fixed costs are sunk—only those for which the cost has already been irrevocably incurred. A variable cost can be a sunk cost if it has already been incurred.