Product Cost & Markup Pricing
Build up prime cost and total production cost per unit from direct materials, labour, expenses and overheads, then apply a markup to set a selling price.
Data verified · July 2026
Does the markup apply to production cost or total cost?
The markup is applied to total cost per unit — production cost plus admin and selling/distribution overheads — so the selling price covers the full cost of getting the product to the customer.
Source: CIMA — Cost Accounting fundamentals, prime cost and absorption costing; ACCA Management Accounting (MA), cost-plus pricing. · updated 2026
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Everything about Product Cost & Markup Pricing
📋Overview+
Builds a full cost card: direct materials, labour and expenses combine into prime cost, then production overheads are added for production cost. Admin and selling/distribution overheads bring you to total cost, which is divided by units produced to give a cost per unit. Applying your chosen markup percentage to that cost per unit sets a cost-plus selling price and shows the resulting profit per unit.
💡 Best practices
- Markup on cost and margin on selling price are different: a 25% markup on cost is only a 20% margin on the selling price — don't confuse the two when negotiating.
- If admin and selling overheads are large relative to production cost, check whether they vary with volume — allocating them per unit can distort pricing at low volumes.
- Revisit the cost card whenever material or labour prices move — a stale cost-plus price erodes margin silently.
🔢 Concrete example
£40,000 direct materials, £20,000 labour, £15,000 production overheads across 5,000 units, 25% markup: roughly £15/unit cost, giving a £18.75 selling price.
📖User guide+
How to use this calculator
- 1
Enter direct materials, labour and expenses for the period.
- 2
Enter production, admin and selling/distribution overheads.
- 3
Enter the number of units produced.
- 4
Enter your target markup percentage on cost to set the selling price.
📚Glossary+
- Prime cost
- The sum of direct materials, direct labour and direct expenses — costs directly traceable to a unit of production before any overhead is added.
- Cost-plus pricing
- Setting a selling price by adding a fixed percentage markup to the total cost per unit, guaranteeing a target profit margin on cost.
ℹ️Sources & updates+
Last data update
July 7, 2026
Sources and references
CIMA — Cost Accounting fundamentals, prime cost and absorption costing; ACCA Management Accounting (MA), cost-plus pricing.
The data in this calculator is updated regularly to reflect the latest official rates. When in doubt, consult the official sources listed above.
FAQ — Product Cost & Markup Pricing
Does the markup apply to production cost or total cost?+
The markup is applied to total cost per unit — production cost plus admin and selling/distribution overheads — so the selling price covers the full cost of getting the product to the customer.
What if I don't have separate admin or selling overhead figures?+
Leave them at zero — the calculator will base the cost per unit on production cost alone, which understates true cost if those overheads are material.