Question

Which of the following is/are correct statement(s)?

Statement 1: Parity pricing is an appropriate strategy when there is little competition and product differentiation.

Statement 2: Cost-plus pricing is used when a firm wants to cover its costs and achieve a reasonable profit margin.

Options

• Only Statement 1 is correct.

• Only Statement 2 is correct.

• Both statements are correct.

• Both statements are incorrect.

Answer 1

Only Statement 2 is correct.

Explanation:

Statement 2 is correct because cost-plus pricing specifically evaluates the overall cost of manufacturing a product and adds a specific markup percentage to ensure that all expenses are met while maintaining a predetermined profit margin.