Work out cost plus pricing instantly with clear inputs, formula shown and shareable results.
Cost-plus pricing adds a fixed percentage to fully absorbed cost. It is transparent and defensible — which is why it dominates government and construction contracting — but it ignores what customers will actually pay, so check the result against the market.
Cost-plus price
Price = (Direct cost + Allocated overhead) x (1 + Markup %)
Resulting margin
Margin % = Markup % / (1 + Markup %) x 100
A markup on direct cost alone often fails to recover fixed overhead at low volumes, so the contract looks profitable while the business loses money.
When your costs are higher than a competitor's — you price yourself out — or when customer value far exceeds cost and you leave money on the table.