Definition Cost-plus Pricing. Description.
Cost-plus Pricing is an accountants approach to pricing that
adds a standard mark-up to the total cost of the product. For this reason
it is also called Mark-up Pricing. The mark-up could be a fixed monetary amount,
but more frequently is a fixed percentage, a certain profit margin. This type
of pricing can be frequently found in manufacturing and retailing environments
and is sometimes also necessary to win government contracts. The method is
internally orientated.
One benefit of this approach is its simplicity. Also it is
fact-based, can be easily calculated and administered. A disadvantage is the
risk of underestimating customer demand and the value as perceived by the
customer as important mechanisms. This may result in overpricing and underpricing.
Furthermore the role of competitors is ignored. Historical accounting costs
are used rather than replacement value.
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Understanding Costs In-depth
Cost Drivers, Cost Behavior, Direct Costs, Indirect Costs, Controllable Costs, Uncontrollable Costs (...)
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Overview of Pricing and Pricing Strategies
Pricing (...)
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Compare with:
Standard Cost Pricing
| Marginal Cost Pricing
| Target Pricing
| Penetration Pricing
| Price Skimming
| Perceived Value
Pricing |
Psychological Pricing |
Promotional Pricing
| Competitive Pricing
| Discount Pricing
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Special Interest Group Leader
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