Distinguish between cost-plus pricing method and variable pricing… - Vidyadip

Question

Distinguish between cost-plus pricing method and variable pricing method.

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Answer

Differences between cost-plus pricing method and variable pricing method are:

Basis	Cost-plus pricing method	Variable pricing method
Price of product	Price remains fixed as it includes cost-plus fixed profit.	Price varies as it depends on person to person.
Bargaining	It is almost nil as cost and profit margin are all set in advance.	Heavy bargaining as price depends on paying capacity of customers.
Quantity	Quantity purchased has no effect on price of the product.	The price reduces with increase in quantity purchased of the product.
Profit	Profit margin is known in advance as it is fixed.	Profit is not known as it depends on the bargaining and negotiations.

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