Which pricing strategy adds a profit margin to total costs of offering a product?

Which pricing strategy adds a profit margin to total costs of offering a product?

• A. Cost-plus pricing
• B. Demand
• C. Customized tour
• D. Dependables

Answer: (A)

Cost-plus pricing is a method where the price is set by adding a specific profit margin to the total cost of delivering the product or service. You first tally all costs involved—ingredients, labor, overhead—and then apply a markup to ensure the desired level of profit is built into every sale. This approach guarantees that costs are covered and provides predictable profitability, which can be especially helpful in hospitality where costs can fluctuate. It differs from demand-based pricing, which shifts price based on what customers are willing to pay, and from options that describe the product or are not pricing methods, such as a customized tour or distractor terms.

Cost-plus pricing is a method where the price is set by adding a specific profit margin to the total cost of delivering the product or service. You first tally all costs involved—ingredients, labor, overhead—and then apply a markup to ensure the desired level of profit is built into every sale. This approach guarantees that costs are covered and provides predictable profitability, which can be especially helpful in hospitality where costs can fluctuate. It differs from demand-based pricing, which shifts price based on what customers are willing to pay, and from options that describe the product or are not pricing methods, such as a customized tour or distractor terms.