Cost plus pricing

http://www.youtube.com/watch?v=iPCL8M3-c44
In cost plus pricing, Robert Rutledge says that you're leaving money on the table because you're letting your engineering group determine the price. In cost plus pricing, the components of cost drive the price. The engineering team drives these components--raw materials, relationship of raw materials, and payment terms. Moreover, Since the costs are passed along to the customer, there is no incentive to reduce them. Profitability is not being increased in cost plus pricing if the price fluctuates in line with the underlying individual costs.

http://www.youtube.com/watch?v=8aeBW7T99ec
Susan Croson talks about the varieties of cost plus and value pricing. Cost plus pricing comes in three types: 1) Gross Margin, which focuses on the income statement; 2) return on assets which is a balance sheet approach; and 3) time and materials. There are two types of market-based pricing: 1) target price which is used for new products and typically decreases; and 2) the auction model.

http://www.youtube.com/watch?v=dFaP2fE7HVo
In Gross Margin pricing, only costs which appear on the income statement are used. Gross Margin = (production costs + sales and general administration costs + desired profit) / number of units.