Cost-plus Pricing

Cost Plus Pricing

Calculating Cost-plus pricing

To determine price using the cost-plus method:
Cost-plus price = (Total cost of production + mark-up) / Total output

For example if you are producing and selling bags and your cost to produce 200 bags was $5,000 and you want to make 10% profit on each bag, you would determine your price as follows:

($5,000 + mark-up) / 200
($5,000 +($5,000*10%) / 200
($5,000 + $500 ) / 200
= $5500 / 200
= $27.50

Alternately, you can also calculate as below:

($5,000 * 1.10) / 200
= $5,500 / 200
= $27.50

Therefore, in order to make a 10% profit on each bag you will need to price each at $27.50.

Please view my other post on pricing strategies for additional information.

Julian Gooden

Julian Gooden

Julian assists businesses and individuals to grow online, helping with web/business development, content writing, SEO and social media. Please don't hesitate to drop Julian a line if you have any questions or comments.