Question

Can cost- plus pricing maximize profit? Why, or why not (explain in a paragraph)

Answer 1

Yes, cost-plus pricing maximizes profit

Cost-plus pricing calculates the selling cost by adding a percentage of profit to the production cost. There are two types a full cost and direct cost, the former is when one takes both fixed cost and variable cost whereas in the latter we take only the variable cost and add the percentage of profit respectively. The main objective is to maximize profit as not only do they cover the costs of production but also estimate the return and revenue. It is one of the easiest ways to maximize profit as easy to calculate and very little information is required hence reducing transaction costs.