Chair Co has in development several new products. One of them is a new type of luxury car seat. The estimated labour time for the first unit is 12 hours but a learning curve of 75% is expected to apply for the first eight units produced. The cost of labour is $15 per hour.

The cost of materials and other variable overheads is expected to total $230 per unit. Chair Co plans on pricing the seat by adding a 50% mark-up to the total variable cost per seat, with the labour cost being based on the incremental time taken to produce the 8th unit.

Chair Co uses cost-plus pricing.

Which of the following statements regarding cost-plus pricing strategies are correct?
(1) Marginal cost-plus pricing is easier where there is a readily identifiable variable cost
(2) Full cost-plus pricing requires the budgeted level of output to be determined at the outset
(3) Cost-plus pricing is a strategically focused approach as it accounts for external factors
(4) Cost-plus pricing requires that the profit mark-up applied by an organisation is fixed

A. (1), (2) and (4)
B. (1) and (2) only
C. (3) and (4)
D. (1) and (3)