What is cost price minus selling Price?

Answer 1

Price determination for many consumer products is often a function of the cost of production and a

desired level of mark-up. Price determination by this desired level of mark-up is often referred to as

cost-plus pricing, mark-up pricing or full-cost pricing

(1)

. There are several "rules-of-thumb" related to

mark-up pricing. For example, some retailers who sell to consumers may expect to price items at 20 to

100% above their cost. There is, however, a fine line between the desired mark-up, cost of production

and the price that the market will bear. All of these elements must be carefully understood and respected.

For instance, the price the market will bear is actually a function of demand. For example, a 20%

mark-up may yield a selling price that is less than what the market will support. Luxury goods and niche

products often command a premium which exceed the set mark-up. That is why cost of production,

desired mark-up and market demand should all be evaluated when establishing a product's selling price.

To determine a product's selling price using the mark-up method, the total cost of producing a product on

a per unit basis must me known. Total cost should include all of the costs incurred in getting the product

to the point of sale. This would include but is not limited to input costs, labor, overhead costs,

transportation costs, warehousing costs, distribution costs and marketing costs.