Answered: Can cost-plus pricing maximize profit?…

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

Related questions

Question

Can cost-plus pricing maximize profit? Why, or why not?

Expert Solution

Background

Two approaches of cost-plus pricing:

Cost-plus pricing: In this method of pricing a product, the marketer of the product adds a particular percentage of the total cost of production of the product to reach the selling price of the product. For example, 20% to 30% of the total production cost can be added over the original cost to reach the selling price.
Mark-up pricing: In this method of pricing a product, the reseller or the intermediary adds a certain amount of the percentage to the procurement cost of the product in addition to the selling price charges by the company from him, for example, adding $100 to a $500 product. This pricing strategy is used by the resellers mainly.