Cost-plus pricing (or markup pricing) is a cost-based method that simply adds a standard markup to the cost of a product or service.
Under the cost-plus pricing approach, a company needs to establish the total units to be sold. Note: an estimation of units can be used if the actual unit total is not available. Variable costs will remain a constant regardless of output, but the average unit fixed costs may decrease as output increases.
As an example, let’s assume a cell phone case manufacture will be producing cell phone cases. Suppose they have fixed costs of $5 million, variable costs of $2 per unit, and expects to sale 500,000 units of one particular cell phone case model. The cost-plus pricing formula will look like this:
Cost-plus Pricing – Formula
After the calculation, you can see that the cost per unit (cost per cell phone case) is $12 per unit.
Cost-plus Pricing – Calculator
Use the cost-plus pricing calculator below to conduct your own marketing calculations.