1. In competitive, common-product environment, a seller would most likely use: A. time-and-material pricing B. variable...

1. In competitive, common-product environment, a seller would most likely use: A. time-and-material pricing B. variable costing C. target costing D. Cost-plus pricing

2. Mystique Co. provides the following information for the new product if recently introduced: Total unit cost $30 Desired ROI per unit $10 Target selling price $40 What would be Mystique Co.’s percentage markup on cost?

Expert Solution

1. In competitive, common-product environment, a seller would most likely use Cost-plus pricing approach. The cost-plus approach starts by estimating the costs of production, adds a profit margin and then derives a market price. Market-driven costing focuses on customer requirements and uses the concept of allowable cost to transmit the competitive pressure of the marketplace to the company's designers and suppliers. Compare to other approaches, seller would prefer this approach because it takes into consideration market competition factor. Where as other approaches simply focus on costing of the product. Costing is only one aspect in competing market. We need to look to other aspects like where should we reduce our cost, quality of product, prices of our competitors,etc. This well help seller to survive in the market.

2. Mystique Co.’s percentage markup on cost = ( Desired ROI / Total unit cost ) * 100

= ( 10 / 30 ) * 100

= 33.33%

ekkarill92 answered 1 year ago

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