Question

Under full cost pricing, price is determined ____________.

• A. by adding a margin to the average cost
• B. by comparing marginal cost and marginal revenue
• C. by adding normal profit to the marginal cost
• D. by the total cost of production

Answer 1

The correct option is A by adding a margin to the average cost

Under full cost pricing, price is determined by adding a margin to the average cost. In this method, markup cost to cover overhead costs and profits are also added with the average cost.