‘A – – – – – – – – is a price in which the supplier and buyer agree that the supplier can charge a price based on actual costs incurred, plus a margin for profit’.

‘A – – – – – – – – is a price in which the supplier and buyer agree that the supplier can charge a price based on actual costs incurred, plus a margin for profit’.
A . A whole life cost
B . A target cost incentive price
C . A fixed price
D . A cost-based price

View Answer

Answer: D

Explanation:

This should be an easy question. The definition describes nicely one possible form of cost-based price. It is important to try to be able to distinguish cost from price.

The ‘target cost incentive’ method of pricing might have been tempting as an answer, since the definition shown mentions cost, but it mentions neither target nor incentive, and can therefore be ruled out.

And whole life cost is a different concept altogether.