Advantages of Marginal Cost plus Pricing

Advantages of Marginal Cost plus Pricing 

1.    Variety of product

Marginal cost plus pricing system is suitable, where a number of products are being produced. A profit margin is added to the contribution.

2.    Suitable for lower fixed cost

Marginal cost pricing is suitable, where fixed production cost is at lower side, otherwise this system can bring huge losses to the organization. (Full cost may be more than selling price).

3.    Focuses Contribution

Marginal cost pricing system is based on contribution maximization concept i.e. by maximizing contribution profit can be maximized, because fixed cost are period cost.