Cost-plus pricing is a pricing strategy used by companies to determine the price of a product or service. It involves adding a specific fixed percentage (a "markup") to the products unit cost to determine the selling price. The markup percentage is a method of generating a particular desired rate of profit. The cost-plus pricing method is simple and easy to calculate, making it a good fit for businesses that want to pursue a cost-leadership strategy.

To calculate cost-plus pricing, you need to understand the cost-plus pricing formula. The formula involves taking the total fixed and variable costs (such as labor, manufacturing, and shipping) and adding the desired profit percentage. For example, if the cost of making a pair of jeans is $60 and the desired profit margin is 30%, the selling price would be $78 ($60 + 30% of $60) .

Cost-plus pricing is commonly used by retail stores to set prices. It is also a good way to test the market and determine how much a customer is willing to pay for a product. However, cost-plus pricing does not take external factors such as competitors into account, so it may not be the best fit for all businesses.

Advantages of cost-plus pricing include its simplicity and ease of use, as well as the ability to adjust prices relative to increases or decreases in the product cost. Disadvantages include the potential for profit loss if costs decrease and the pricing strategy does not adjust accordingly, as well as the fact that it ignores competition.

In summary, cost-plus pricing is a pricing strategy that involves adding a fixed percentage to the products unit cost to determine the selling price. It is a simple and easy-to-use method that is commonly used by retail stores, but it may not be the best fit for all businesses.