PRESENTATION OUTLINE
What is cost-plus pricing?
Cost-plus pricing is a pricing strategy that is used to maximize the rates of return of companies.
Cost-plus pricing is also known as mark-up pricing where cost + mark-up = selling price.
- Simple
- Assured contract profits
- Justifiable
- Ignores competition
- Product cost overruns
- Ignores replacement costs
Technology companies often use cost-plus pricing because they spend so much money on research, they need to make sure they cover all the costs.
Overall, this method is not acceptable for getting a price of a product that is to be sold in a competitive market, and most likely results in a seriously overpriced product.
