# cost-plus pricing

## Definition

One method used by businesses to determine how to price goods and services. This type of pricing includes the variable costs associated with the goods, as well as a portion of the fixed costs of operating the business. It is calculated as (average variable cost + % allocation of fixed costs)*(1+ markup %). For example, if a business sells a microwave that has a variable cost of \$15.00, a fixed cost allocation of \$5, and a desired markup of 30%, the price of the microwave using this method would be (\$15 + \$5)*(1+0.30), or \$26.

## Use cost-plus pricing in a sentence

We decided to use the cost-plus pricing method as there were many elements to consider that were both variable and fixed.

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Because we were a new business, we had to disregard our ideal cost-plus pricing in order to draw in new customers with big savings.

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When quoting jobs for the asphalt repair company where my husband works, they use a cost-plus pricing method by adding a 10% markup over the fixed costs and variable costs.

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