CAT / FIA FMA Syllabus C. Cost Accounting Techniques - Cost records and account - Notes 3 / 17
Cost plus pricing
Cost plus pricing means that a desired profit margin is added to total costs to arrive at the selling price.
Mark-up profit
is calculated as a percentage of the total costs of the job
e.g. 20% mark-up, for example 20% of the total cost of $100 is $20 is the mark up profit
| % | |
| selling price | 120 |
| total cost | (100) |
| profit | 20 |
Margin profit
is calculated as a percentage of the selling price of the job
e.g. 20% margin, for example 20% of the selling price of $100 is $20 margin profit
| % | |
| selling price | 100 |
| total cost | (80) |
| profit | 20 |
Work in progress
Sometimes, jobs may not be 100% complete at year end. The value of work in progress is simply the sum of the costs incurred on incomplete jobs.
