Business – 5.4 Costs – Uses of cost information | e-Consult
5.4 Costs – Uses of cost information (1 questions)
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First calculate total cost per unit, then add a 20 % markup.
| Product | Total cost (£) | Markup (20 %) (£) | Selling price (£) |
| A | £20 (8+12) | £4.00 | £24.00 |
| B | £20 (5+15) | £4.00 | £24.00 |
Both products end up with the same selling price of £24. If market research shows that comparable products sell for £22–£23, the price may be slightly high, reducing competitiveness. However, if the firm offers additional features or higher quality, the £24 price could be justified. The company should review the perceived value and possibly adjust the markup or seek cost reductions.