The cost-plus purchasing strategy involves?

The cost-plus purchasing strategy involves?

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

Answer: (A)

Cost-plus purchasing centers on reimbursing suppliers for their actual costs and adding a predetermined fixed markup to determine the final price. This matches an agreement with distributors for a fixed markup above costs, because the price moves with the supplier’s costs while guaranteeing a set margin for the supplier. It’s not about when you receive goods (that’s just-in-time delivery), not about getting lower prices by buying in larger quantities (volume discounts), and not about bidding to find the lowest offer (competitive bidding). Instead, the buyer pays the documented cost plus the agreed markup, which provides transparency and predictable supplier compensation, though it can allow cost fluctuations to pass through to the buyer if the markup is fixed without protections.

Cost-plus purchasing centers on reimbursing suppliers for their actual costs and adding a predetermined fixed markup to determine the final price. This matches an agreement with distributors for a fixed markup above costs, because the price moves with the supplier’s costs while guaranteeing a set margin for the supplier. It’s not about when you receive goods (that’s just-in-time delivery), not about getting lower prices by buying in larger quantities (volume discounts), and not about bidding to find the lowest offer (competitive bidding). Instead, the buyer pays the documented cost plus the agreed markup, which provides transparency and predictable supplier compensation, though it can allow cost fluctuations to pass through to the buyer if the markup is fixed without protections.