Managerial Accounting, v1.0: "Chapter 7, Section 7: Cost-Plus Pricing and Target Costing"

In this section, you will explore other pricing systems and why companies may choose to use them. Cost-plus pricing starts with an estimate of the costs incurred to build a product, and a certain profit percentage is added to establish the price. Companies often use this method when it is difficult to determine a reasonable market price. Target costing integrates the product design, desired price, desired profit, and desired cost into one process beginning at the product development stage.