Which pricing method involves a predetermined percentage markup based on estimated costs?

The pricing method known as Cost-Plus Pricing involves adding a predetermined percentage markup to the estimated costs incurred in producing a product or service. This approach allows businesses to ensure that all costs are covered while achieving a specific profit margin.

In this method, the total cost of the product is calculated, which includes direct costs such as materials and labor, as well as indirect costs. After determining the total cost, the business applies a markup percentage to set the selling price. This straightforward strategy is particularly useful for companies in industries where costs can be easily identified and calculated, ensuring consistency in pricing structures.

This contrasts with other pricing strategies, such as markup on sales price, which calculates markup based on the final selling price rather than the cost, or average-cost pricing, which relies on the average costs of a considerable volume of units rather than individual unit costs. Deceptive pricing, on the other hand, refers to practices that mislead consumers about actual prices, which is not related to the systematic approach that Cost-Plus Pricing entails.