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Cost plus pricing is done in job costing.
This cost plus pricing can be done by adding profit markup. Is adding profit margin also part of cost plus pricing?One person’s mark-up is another’s profit margin.
Mark-ups are defined as the amount added to costs to give selling prices. Margins are the percentage of sales that represents profit.
If cost = 120 and the markup % is 50%, then the profit is 60 and the selling price 180.
The margin (with selling price) is profit/selling price = 60/180 = 33.33%.
The maths can work either way, but the phrase ‘cost plus pricing’ implies that the company knows its costs then adds a percentage for profit to generate a selling price.
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