The percentage added to unit cost that makes a profit for a business when setting the price.

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Multiple Choice

The percentage added to unit cost that makes a profit for a business when setting the price.

Explanation:
Markup is the percentage added to the unit cost to set the selling price. This amount covers overhead and provides profit, so the price you charge equals cost × (1 + markup/100). For example, if the cost is 50 and the markup is 20%, the price becomes 60, and profit per unit is 10 before other expenses. The term “cost-plus pricing” refers to the method of pricing by adding a markup to cost, but the wording here describes the markup itself—the percentage added to cost. Penetration pricing is about setting a low price to enter a market and isn’t about the added percentage.

Markup is the percentage added to the unit cost to set the selling price. This amount covers overhead and provides profit, so the price you charge equals cost × (1 + markup/100). For example, if the cost is 50 and the markup is 20%, the price becomes 60, and profit per unit is 10 before other expenses. The term “cost-plus pricing” refers to the method of pricing by adding a markup to cost, but the wording here describes the markup itself—the percentage added to cost. Penetration pricing is about setting a low price to enter a market and isn’t about the added percentage.

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