Which pricing method adds a profit markup to cost to determine price?

• A. Pricing based on competitor prices
• B. Pricing determined by demand
• C. Pricing equal to total cost plus tax
• D. Calculate a certain percentage of the total cost of the treatment and add on to the amount to make as profit

Answer: (D)

Adding a profit margin to cost to set the selling price is known as cost-plus pricing. The price is determined by taking the total cost of delivering the service (materials, labor, overhead) and applying a fixed markup percentage to that cost, so price = cost plus markup. This approach guarantees the cost is covered and a defined profit is built in. For example, with a total cost of 200 and a 25% markup, the price would be 250. This method differs from pricing based on competitor prices or on demand, which set price by reference to others or by what customers are willing to pay, and from simply pricing equal to total cost plus tax, which adds tax but not a profit margin.