does not account for competitors goods which can adversely affect sales
can result in inefficient pricing if the company s variable costs are comparatively lowvariable cost plus pricing vs cost plus pricingvariable cost plus pricing is distinct from cost plus pricing a more traditional model that sets costs based on the total cost of producing that good using cost plus pricing prices are set by taking the total cost of production and adding a markup variable cost plus pricing adds a markup only to the variable costs with the assumption that the markup will be sufficient to cover the fixed costs cost plus pricing has been criticized by some management specialists because it does not adequately incentivize cost containment and improvements in efficiency when prices are based on total costs the company earns more revenue by bloating their fixed costs than they do by reducing those inefficiencies 1