Cost-plus Pricing

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What is Cost-plus Pricing? Meaning.

Cost-plus Pricing is an accountants approach to Price Setting 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.

Discuss Forum about Cost-plus Pricing. Start a new topic Share your knowledge or ask a question   🔥 NEW Disadvantages of Cost-plus Pricing Method Cost-plus pricing is an easy method for applying a unit margin on a product. This makes it easy to calculate profit base... 5   1 comments

Information Sources Various sources of information regarding Cost-plus Pricing. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops. Understanding Costs In-depth Cost Drivers, Cost Behavior, Direct Costs, Indirect Costs, Controllable Costs, Uncontrollable Costs This presentation provides a better understanding about cost, cost types, costs drivers and other cost dynamics, and inc... Overview of Pricing and Pricing Strategies Pricing This presentation contains an overview of various pricing strategies, including for example pricing based on competition...

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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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