ACCA Applied Skills · Performance Management · Pricing decisions
A company uses full cost-plus pricing. A product has a total unit cost of $40 (including absorbed overheads) and the company adds a mark-up of 25% on full cost. What is the selling price per unit?
The selling price is $50 because a 25% mark-up is applied to the full cost of $40, giving $40 × 1.25. A margin on selling price would produce $53.33, but the question states a mark-up on cost.
- A$50.00Correct
- B$53.33
- C$45.00
- D$30.00
Explanation
Mark-up on cost means price = $40 × 1.25 = $50. The $53.33 figure comes from treating 25% as a margin on selling price ($40 / 0.75), which is the wrong base. $45 would be a 12.5% mark-up and $30 would result from deducting 25%.
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