Cost-plus pricing is the simplest cost-based pricing method, in which a standard, predetermined percentage markup is added to the total costs of the product (fixed and variable). This markup represents the company’s desired profit.
This method is popular because of its simplicity and fairness, as retailers and wholesalers can easily calculate their prices. However, it ignores changes in demand and the customer’s perceived value. Adding a standard markup does not always guarantee the best price – it may be too high in a weak market or too low in a strong market.
