What type of fee method allows a design firm to add a specific percentage to the net cost of merchandise purchased by a client?

The fee method that allows a design firm to add a specific percentage to the net cost of merchandise purchased by a client is known as the cost plus percentage markup. This approach is commonly used in design practices where the firm purchases products on behalf of the client. In this structure, the design firm first calculates the total cost of the merchandise, which could include materials, furnishings, or other goods, and then adds a predetermined markup percentage to that cost.

This strategy benefits both the client and the design firm. Clients can see the direct cost of goods and understand the markup involved, while firms can cover their overhead and generate profit based on the volume of merchandise purchased. This method is preferred in situations where transparency and cost management are emphasized in the client-designer relationship.

In contrast, fixed fee arrangements usually entail a predetermined total cost for services regardless of expenses incurred, while hourly fees are based on the time spent on a project. A combination fee blends different types of fee structures but does not specifically address the markup on merchandise in the same way that cost plus percentage markup does. Thus, the distinctive nature of the cost plus percentage markup makes it the correct choice for this question.