What is Cost-Plus Pricing?

A definition of Cost-Plus Pricing

“Cost-plus pricing is a strategy where a business sets the price of a product by calculating its production costs and then adding a markup for profit, ensuring all costs are covered and a profit is made.”

Cost-Plus Pricing in Business Glossary - What is a Cost-Plus Pricing?

Business Glossary > What is Cost-Plus Pricing?


Examples of Cost-Plus Pricing in a Sentence:

The store uses cost-plus pricing to determine the prices of its goods.

Cost-plus pricing helps businesses cover their expenses and gain profit.

With cost-plus pricing, companies set prices based on costs and desired profit margins.

Why is Cost-Plus Pricing Important in Business?

Cost-plus pricing is significant as it ensures that all production costs are covered and a profit margin is set. This method provides a straightforward way for businesses to ensure profitability and maintain financial stability.

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Associated Terms

Here are some associated business terms and synonyms for “Cost-Plus Pricing”:

  • Markup Pricing
  • Cost-Based Pricing
  • Full-Cost Pricing

Company Example: IKEA and Cost-Plus Pricing

IKEA often uses cost-plus pricing by calculating the production costs of its furniture items and then adding a standard markup to ensure profitability while maintaining competitive prices in the market.

Final Notes on Cost-Plus Pricing

Cost-plus pricing is ideal for businesses that want a simple pricing method that covers costs and assures a profit margin. However, it may not always reflect customer willingness to pay, so market analysis is also crucial.


This has been a definition of Cost-Plus Pricing meaning.

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