• The company calculates the total cost of producing a product or providing a service.
• The company adds a markup percentage to the cost, which represents the profit margin.
• The total cost plus the markup equals the selling price of the product or service.

Cost-plus pricing is a simple and straightforward pricing strategy that can help businesses ensure that they are covering their costs and making a profit. However, it can also result in prices that are not competitive or in line with customer expectations, so companies need to be careful when using this strategy. Additionally, cost-plus pricing does not take into account other important factors such as market demand, competition, or customer value.