What does the selling price represent in cost-based pricing?

In cost-based pricing, the selling price is determined based on the cost of producing the product along with a specified markup. The correct choice indicates that the selling price is calculated as the cost divided by one minus the markup percentage on the selling price. This method ensures that the calculated selling price not only covers costs but also incorporates the desired profit margin represented by the markup percentage.

For instance, if a product costs $100 to produce and the company aims for a 20% markup on the selling price, the formula would allow for calculation of the selling price that would ensure the desired profitability after costs are taken into account. As such, this approach is practical in establishing a price that maintains profitability while adhering to the predetermined markup structure.

Other options may confuse the relationship between cost, markup, and selling price, leading to incorrect calculations or misunderstandings of how pricing strategies work in a cost-based model. The importance of tying the selling price back to the foundational costs while appropriately factoring in desired margins distinguishes why this choice is accurate.