When a firm calculates its unit costs and then adds a percentage profit to determine the price; also known as mark-up pricing.

• A. Cost-Based Pricing
• B. Cost-Plus Pricing
• C. Competition-Based Pricing
• D. Value-Based Pricing

Answer: (B)

Pricing by adding a markup to cost means you first calculate the unit cost and then set the price by adding a fixed percentage as profit. This approach is known as cost-plus pricing, a form of cost-based pricing where the selling price is anchored to production costs plus a profit margin. It differs from competition-based pricing, which bases price on rivals’ prices, and value-based pricing, which bases price on the customer’s perceived value rather than cost. The focus here is on recovering costs and securing a desired profit by building that margin directly into the price.