ICAEW BIP · Chapter 4 · Question 3 of 11
A company uses marginal cost-plus pricing with a mark-up of 60%. The variable cost of a product is £36 per unit and the fixed cost per unit, based on budgeted output, is £14. What is the selling price?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £57.60
Explanation
Marginal cost-plus pricing adds the mark-up to variable (marginal) cost only. Price = £36 x 1.60 = £57.60. The mark-up has to be large enough to cover fixed costs and give a profit, which is why it is higher than a typical full cost mark-up.
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