Answer:
Mark-up
pricing: This is the simplest
method of setting the price of a product. In this method, the final price of a
product includes the unit cost of the product and a markup as profit margin.
Several varieties of markup pricing -
also known as cost-plus pricing - exist, but the common thread is that one
first calculates the cost of the product, then adds a proportion of it as
markup. The amount to be marked up is decided at the discretion of the company.
Cost-plus pricing is used primarily
because it is easy to calculate and requires little information. Information on
demand and costs is not easily available; however, this information is
necessary to generate accurate estimates of marginal costs and revenues.
Moreover, the process of obtaining this additional information is expensive.