Which pricing approach is also known as mark-up pricing?

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

Answer: (A)

Adding a markup to the cost of producing the product to determine the selling price is cost-plus pricing. The price is simply the unit cost plus a predetermined markup to cover overhead and desired profit. This is why it’s called mark-up pricing—the markup is the extra amount added to cost.

For example, if a unit costs $10 to make and the company wants a 40% markup, the selling price would be $14. This approach contrasts with value-based pricing (price based on what customers perceive the product is worth) and competition-based pricing (price set relative to rivals), while cost-based pricing is a broader category that can include methods other than a straightforward markup on cost.