CBSE BoardEnglish MediumSTD 12 CommerceEntrepreneurshipEnterprise Marketing3 Marks
Question
Explain 'cost-plus pricing method' of pricing with a suitable example.
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Answer
This is the most common technique of pricing where the manufacturer charges a price to cover the cost of producing a product plus a reasonable profit. This method of pricing is based on manufacturing estimates.Estimates are made of the resources required, the cost of these resources and the time for which they will be used. On the basis of these estimates, the price is determined.
e.g. a shirt manufacturer may arrive at the selling price on the basis of the following information:
Estimated cost of cloth- ₹ 70
Estimated cost of labour ₹ 12
Estimated cost of overheads ₹ 8
Profit @ 20% 20% of (70 + 12 + 8) = ₹ 18
$\therefore$ Selling price of shirt is 108, i.e. 90 + 18
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