Explain one situation in which contribution-cost pricing would seem to be more appropriate than mark-up pricing.

Contribution-cost pricing may be more appropriate than mark-up pricing in a situation where a company is trying to penetrate a highly competitive market.

Step 1: Identify the Market Situation In a highly competitive market, there are many similar products or services available. This means that customers have a lot of choices and can easily switch to a different provider if they find a better price.

Step 2: Understand the Pricing Strategies Mark-up pricing involves adding a standard profit margin to the cost of the product to determine its selling price. This method is simple and ensures a consistent profit margin, but it doesn't take into account the competitive market situation.

On the other hand, contribution-cost pricing involves setting the price at a level that covers the variable costs of producing the product and contributes to the fixed costs and profit. This method allows for more flexibility in pricing and can be used to set a lower price that attracts customers in a competitive market.

Step 3: Apply the Appropriate Pricing Strategy In this situation, using contribution-cost pricing would allow the company to set a competitive price that attracts customers and helps the company gain a foothold in the market. While the profit margin may be lower than with mark-up pricing, the increased sales volume could lead to higher overall profits.

So, in a highly competitive market, contribution-cost pricing would seem to be more appropriate than mark-up pricing.