Cost-Based Pricing

Cost-Based Pricing is exactly what it sounds like: basing the price of an item or service against what it costs to make it to ensure profitability. If a widget costs $1 to produce, then a manufacturer might mark its cost up by a slight profit margin, say, to $2, so that the manufacturing cost is covered and any excess overage becomes profit. This is a different pricing stratgey from market-based pricing, where the going rate for an item or service in the market dictates the price.