Page 20 - P1 Integrated Workbook STUDENT 2018 - Copy
P. 20
Chapter 1
Pricing
6.1 Using absorption costing
Add a mark up to total budgeted factory cost:
Selling price = Full cost per unit × (1 + mark-up percentage)
Key advantages:
ensures all production costs are covered
can be used to justify price rises.
Key disadvantages:
ignores customers and competitors
doesn’t reflect the incremental cost of new orders.
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