Variable Cost-Plus Pricing
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Definition of 'Variable Cost-Plus Pricing'
A pricing method in which the selling price is established by adding a markup to total variable costs. The expectation is that the markup will contribute to meeting all or a part of fixed costs, and generate some level of profit. Variable cost-plus pricing is especially useful in competitive scenarios such as contract bidding, but is not suitable in situations where fixed costs are a major component of total costs.
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Investopedia explains 'Variable Cost-Plus Pricing'
For example, assume total variable costs for manufacturing one unit of a product are $10 and a markup of 50% is added. The selling price as determined by this variable cost-plus pricing method would be $15. If contribution to fixed costs per unit is estimated at $4, then profit per unit would be $1.
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Search results for 'Variable Cost-Plus Pricing'
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http://financialedge.investopedia.com/financial-edge/1111/4-Pricing-Strategies-That-Increase-Your-Spending.aspx
... understand that a mix of the following pricing strategies will ultimately produce
more profits than selling exclusively with a variable cost-plus pricing method ...
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