Skip to content

CMA Final · Strategic Cost Management · Pricing Decisions and Strategies

Meenakshi Fabrics makes a shirt with total unit cost of Rs 400 at normal volume. Management follows a cost-plus pricing policy that adds a mark-up of 25% on total cost. What is the selling price per shirt?

The selling price is Rs 500, because a 25% mark-up on a total cost of Rs 400 adds Rs 100. Treating 25% as a margin on sales would wrongly give Rs 533, since the policy states the mark-up is applied to cost.

  1. ARs 475
  2. BRs 500Correct
  3. CRs 520
  4. DRs 533

Explanation

Mark-up on cost means price = 400 x 1.25 = Rs 500. Rs 533 comes from treating 25% as a margin on selling price (400/0.75), which is the wrong base. Rs 475 and Rs 520 are not derived from the data.

Did you get it right without looking?

One question tells you little. A timed set on Pricing Decisions and Strategies shows your real accuracy, how long you take and where you lose marks.

Practise Pricing Decisions and StrategiesFree diagnostic mock

More Pricing Decisions and Strategies questions