Cost-plus pricing
Also called cost-plus
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is cost-plus pricing?
Cost-plus pricing sets a customer’s price as the distributor’s cost plus a fixed percentage or amount, such as cost plus 12%. It suits large customers who want transparent pricing and contracts where costs change frequently.
How it works
Cost-plus protects the distributor’s margin when supplier prices rise, but only if both sides agree on what “cost” means: invoice cost, replacement cost, or cost after rebates.
Cost-plus pricing example
Under a cost-plus-15% agreement, a bearing whose cost rises from $40 to $44 goes from $46 to $50.60 for the customer.
Often confused
Related terms
- MarkupMarkup is the amount added to an item’s cost to set its selling price, expressed as a percentage of cost: markup % = (price − cost) ÷ cost.
- Contract pricingContract pricing is a set of fixed prices agreed with a specific customer for specific items over a set period, after a negotiation, bid, RFP or GPO deal.
- Replacement costReplacement cost is what it would cost a distributor to buy an item again today, as opposed to what it paid for the stock already on its shelf.
- List priceList price is the published, undiscounted price of a product, set by the manufacturer in its price book.
