What is cost-plus pricing?
Cost-plus pricing: A price set as the cost of one item plus a markup, for example cost x 1.6 for a 60% markup.
Price = cost x (1 + markup)
Example
A candle costs $6 to make. With a 60% markup: $6 x 1.6 = $9.60. Ben adds 75% to a $3.20 sandwich: $5.60, but the cafe next door sells a similar one for $5.00. Cost-plus covers your costs; it says nothing about what customers will pay.
Made-up people and numbers from the cases of our course; the math is real.
A common mistake
Taking the markup in dollars for the price: $3.60 is only the markup. The price is $6 + $3.60.
Try it with your own numbers: Markup vs margin calculator (free, no sign-up).
Practise this in block 1
Block 1 of Ownwise is free, with no account needed to start: short lessons on costs, margin and break-even, then a made-up case where you make the decisions. This term has its own lessons in block 2, part of the paid practice pack.