Distinguish between Cost plus pricing and mark-up pricing

Cost Plus Pricing:

1. Calculation:

• Cost Plus Pricing sets the selling price by adding a predetermined profit margin or markup to the cost of producing a product or delivering a service.
• The formula is: Selling Price = Cost + (Cost x Markup Percentage)

1. Focus:It is cost-driven, as it starts with the calculation of production or service costs and then adds the desired profit margin.
2. Risk Management:Cost Plus Pricing can help ensure that costs are covered, but it may not consider market demand or competitive pricing.

(b) Mark-Up Pricing:

1. Calculation: Mark-Up Pricing sets the selling price by adding a fixed amount or percentage to the cost of a product or service. The formula is: Selling Price = Cost + Markup Amount
2. Focus:It is less concerned with the specific cost structure and focuses more on achieving a particular markup level.
3. Flexibility:Mark-Up Pricing offers more flexibility, as the markup amount can be adjusted based on market conditions or pricing strategy.

Subcribe on Youtube - IGNOU SERVICE

For PDF copy of Solved Assignment

WhatsApp Us - 9113311883(Paid)