Cost-plus pricing
Cost-plus pricing adds a stated mark-up or required profit allowance to a defined cost base. The base may be full production cost, a broader full cost or a marginal cost, so identify what is included before calculating. It is simple and can support consistent quotations but may ignore customer value, demand and competitors. A price computed from low budgeted volume can also rise as fixed cost is spread over fewer units.
Worked example
Full cost per unit is $80 and mark-up on cost is 25%, giving price $100. A required 25% margin instead gives $80 ÷ 0.75 = $106.67.
Common mistake
Mark-up and margin have different denominators. A calculated price does not prove that customers will buy at it.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | PM | Direct | September 2026–June 2027 |