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Cost plus pricing is a cost-based method for setting the prices of goods and services. Under this approach, the direct material cost, direct labor cost, and overhead costs for a product are added up and added to a markup percentage (to create a profit margin) in order to derive the price of the product.
Markup price = (unit cost * markup percentage) Markup price = $450 * 0.12 Markup price = $54 Sales Price = unit cost + markup price. Sales Price= $450 + $54 Sales Price = $504 Ultimately, the $54 markup price is the shop's margin of profit. Cost-plus pricing is common and there are many examples where the margin is transparent to buyers. [4]
The cost breakdown analysis is a popular cost reduction strategy and a viable opportunity for businesses. [1] [2] [3] 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]
Congestion pricing was developed as a first-best solution, based on the assumption that the optimal price of road space equals the marginal cost price if all other goods in the economy are also marginal cost priced. In the real world this is not true, thus, actual implementation of congestion pricing is just a proxy or second-best solution.
In manufacturing or other non-construction industries, the portion of operating costs that is directly assignable to a specific product or process is a direct cost. [ 4 ] In project management , direct costs are those for activities or services that benefit specific projects, for example salaries for project staff and materials required for a ...
A loss leader (also leader) [1] is a pricing strategy where a product is sold at a price below its market cost [2] to stimulate other sales of more profitable goods or services. With this sales promotion/marketing strategy, a "leader" is any popular article, i.e., sold at a low price to attract customers. [3]
Yield management (YM) is a variable pricing strategy, based on understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, time-limited resource (such as airline seats, hotel room reservations, or advertising inventory). [1]
However, total costs for EDLP are higher in many markets, and it is extremely expensive for retailers to switch strategies. Not only is the initial cost high, but the EDLP strategy must be maintained long enough for consumers to associate lower prices with the brand. [4] Example of an "Everyday Low Price" advertisement at Walmart