Under which one of the following circumstances is cost an important input into determining selling price?

Question

A. When costs are fixed
B. When products are specialized
C. When direct materials cost is high
D. When direct labor cost is high

Answer 1

When products are specialized.

In this circumstance, cost becomes an important input into determining the selling price because specialized products often require unique materials, skilled labor, and potentially more intricate processes which can significantly impact the overall cost of production. Ensuring the selling price covers these specialized costs while still delivering adequate profit margins becomes crucial. For standard products and high direct materials or labor costs, the pricing might be more influenced by market competition and other external factors.