Cost-plus pricing

Cost-plus pricing is a pricing strategy in which the selling price is determined by adding a specific amount markup to a product's unit cost. An alternative pricing method is value-based pricing. MR = P + ((dP / dQ) * Q)MR = marginal revenueP = price(dP / dQ) = the derivative of price with respect to quantityMC = P + ((dP / dQ) * Q)MC / P = 1 +((dP / dQ) * (Q / P))(P / MC) = (1 / (1 - (1/E)))(P / MC) = markup on marginal costsE = price elasticity of demand(P / MC) = (1 / (1 - (1/999999999999999))) (P / MC) = (1 / 1)(P /MC) = (1 / (1 - (1/1))) (P / MC) = (1 / 0) (P / AVC) = (1 / (1 - (1/E))) Cost-plus pricing is a pricing strategy in which the selling price is determined by adding a specific amount markup to a product's unit cost. An alternative pricing method is value-based pricing. Cost-plus pricing is often used on government contracts (cost-plus contracts), and was criticized for reducing pressure on suppliers to control direct costs, indirect costs and fixed costs whether related to the production and sale of the product or service or not.