Full Cost-plus
Including both unit cost and a share of overhead cost in the price.Price = unit cost + (overhead/volume) + markup
For example, an ice cream vendor whose cost per ice cream is $1 with overhead costs of $1000 and expected sales volumes of 1000 units who aims to make $1 per sale.Price = $1 + ($1000/1000) + $1 = $3
Unit Cost-plus
Considering only the unit cost of the product in the price.Price = unit cost + markup
For example, an ice cream manufacturer with a unit cost of $1 that has set a gross markup of 50%.Price = $1 + ($1*0.5) = $1.50
Contribution Margin Pricing
A contribution margin is the total dollar amount of gross profit achieved from a unit of sales. For example, a house builder with a target to achieve a $200,000 gross profit from each unit in a housing development who then adds the build cost of each unit to determine a price.Price = variable cost per unit + contribution margin
In the example above, if unit 1a cost $570,000 to build the price would be calculated as:Price = $570,000 + $200,000 = $770,000
