CLEP Marketing Practice Exam 2025 – All-in-One Guide to Achieve Top Scores!

In average-cost pricing, the strategy involves calculating the total costs associated with producing a product, including both fixed and variable costs, and then determining the average cost per unit. The next step is to add a reasonable markup to this average cost to establish the selling price. This markup is intended to cover not just the average cost but also to ensure that the business earns a profit.

Marking up the average cost allows businesses to set a price that can cover all expenses, including production and operational overheads, while also generating profit. A reasonable markup is essential for ensuring sustainability and profitability in a competitive market.

Other options, while potentially related concepts, do not align with the essence of average-cost pricing. Discounts reduce the selling price and may negatively impact perceived value, while a targeted profit margin specifies a desired profit independently of the cost structure. Adding a variable cost factor does not apply here, as average-cost pricing focuses on the fixed and average costs rather than adjusting for variable costs specifically.