The cost-plus purchasing strategy involves:

The cost-plus purchasing strategy involves:

• A. Volume discounts
• B. Just-in-time delivery
• C. Agreement with distributors for fixed markup above costs
• D. Competitive bidding

Answer: (C)

Cost-plus purchasing means the buyer pays the supplier the actual cost of the goods plus a predetermined extra amount, either as a fixed fee or a fixed markup. This structure guarantees the supplier recoups its costs and earns a clear, fixed profit on every contract, making pricing transparent and reducing the supplier’s financial risk. The key idea is that payment is driven by costs incurred, not by a negotiated unit price or by competitive bidding. That’s why the description fits best: an agreement with distributors for a fixed markup above costs. Volume discounts focus on lower prices with larger orders, not on reimbursing costs plus a set profit. Just-in-time delivery is about inventory timing and efficiency, not how costs are reimbursed. Competitive bidding centers on selecting the best price through bids, rather than agreeing to pay costs plus a markup.

Cost-plus purchasing means the buyer pays the supplier the actual cost of the goods plus a predetermined extra amount, either as a fixed fee or a fixed markup. This structure guarantees the supplier recoups its costs and earns a clear, fixed profit on every contract, making pricing transparent and reducing the supplier’s financial risk. The key idea is that payment is driven by costs incurred, not by a negotiated unit price or by competitive bidding.

That’s why the description fits best: an agreement with distributors for a fixed markup above costs. Volume discounts focus on lower prices with larger orders, not on reimbursing costs plus a set profit. Just-in-time delivery is about inventory timing and efficiency, not how costs are reimbursed. Competitive bidding centers on selecting the best price through bids, rather than agreeing to pay costs plus a markup.