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Mittal Industries is into manufacturing of television sets. The company decided to introduce a new range of smart television sets which can use any mobile phone as remote control. The finance department along with the R&D department brainstormed to arrive at an optimal price for the television sets. They decided that the price be fixed based on a manufacturing estimate. Enlist the advantages of fixing price in this manner.

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Advantages of cost plus pricing:

1. Biggest advantage of this is that company knows exactly the amount of expenditure that has incurred on making a product and therefore they can add profit margin accordingly which helps in achieving the desired revenue for a firm.

2. It is the simplest method to decide the price for a product because one has just to add up all the cost and then add profit which you want to earn which will give the price for a product.

3. Since the company is using its own data for deciding cost which makes it easier for a company to evaluate the reasons for escalations in expenses and therefore it can take corrective action immediately.

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