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Cost-plus pricing is a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage (a "markup") to the product's unit cost. Essentially, the markup percentage is a method of generating a particular desired rate of return. [1] [2] An alternative pricing method is value-based pricing. [3]
Manufacturing cost is the sum of costs of all resources consumed in the process of making a product. The manufacturing cost is classified into three categories: direct materials cost , direct labor cost and manufacturing overhead . [ 1 ]
The price of a product or service is defined as cost plus profit, whereas cost can be broken down further into direct cost and indirect cost. [1] As a business has virtually no influence on indirect cost, a cost reduction oriented cost breakdown analysis focuses rather on factors contributing to direct cost.
The cost of goods produced in the business should include all costs of production. [10] The key components of cost generally include: Parts, raw materials and supplies used, Labor, including associated costs such as payroll taxes and benefits, and; Overhead of the business allocated to production. Most businesses make more than one of a ...
For example, the manufacturing cost of a car (i.e., the costs of buying inputs, land tax rates for the car plant, overhead costs of running the plant and labor costs) reflects the private cost for the manufacturer (in some ways, normal profit can also be seen as a cost of production; see, e.g., Ison and Wall, 2007, p. 181).
The total cost curve, if non-linear, can represent increasing and diminishing marginal returns.. The short-run total cost (SRTC) and long-run total cost (LRTC) curves are increasing in the quantity of output produced because producing more output requires more labor usage in both the short and long runs, and because in the long run producing more output involves using more of the physical ...
Direct costs are costs that can easily be associated with a particular cost object. [2] However, not all variable costs are direct costs. For example, variable manufacturing overhead costs are variable costs that are indirect costs, not direct costs. Variable costs are sometimes called unit-level costs as they vary with the number of units ...
Product cost management (PCM) is a set of tools, processes, methods, and culture used by firms who develop and manufacture products to ensure that a product meets its profit (or cost) target. Scope [ edit ]