Cost-Based Pricing

Cost-based pricing is a pricing strategy where a business determines the price of a product based on the costs incurred to produce it. This includes factors such as raw materials, labor, and overhead expenses. Once these costs are calculated, a profit margin is added to establish the final selling price. This method ensures that the company covers its costs and earns a profit, making it straightforward and tangible. However, it may not always account for market demand or competitor pricing, which could affect sales.