Question

Mention the advantages of cost plus pricing.

State two advantages of Cost plus pricing policy.

Answer 1

1. Cost plus pricing is the most widely used technique of pricing. It is a safe approach to pricing. It ensures full coverage of costs and helps in achieving a reasonable return on capital employed.
2. The method is logical and can be defended on moral grounds. It discourages cut-throat competition in the market.

Answer 2

The advantages of cost plus pricing are:

1. Most widely used technique: It is a safe and straightforward pricing strategy that is simple to understand and use.
2. Full coverage of costs: It ensures complete coverage of all costs associated with offering the product (manufacturing and marketing).
3. Reasonable return: It contributes to a reasonable return on capital used by including a defined profit margin.
4. Logical and defensible: The method is reasonable and morally justifiable because it covers legitimate costs.
5. Discourages cut-throat competition: It discourages cut-throat competition in the market by maintaining stable prices.