Cost-based

Referring to a pricing, budgeting, or decision-making approach that primarily considers the costs associated with a product or service. This strategy often emphasizes minimizing expenses to enhance profitability and competitiveness. cost-based methods can be found in various sectors, including manufacturing, logistics, and even service industries, where understanding and controlling costs is essential for financial success.

Cost-based meaning with examples

• In a cost-based pricing strategy, a manufacturer might determine the selling price of a new product by summing the production costs and adding a markup for profit, ensuring that all expenses are covered while still remaining competitive in the market.
• The company implemented a cost-based budgeting system that allows department managers to forecast expenses based on historical data, helping them allocate resources effectively while keeping spending aligned with overall business objectives.
• During the project planning phase, the team adopted a cost-based evaluation method to prioritize initiatives, focusing on projects with lower costs but high potential returns to enhance the organization's financial health.
• For the upcoming fiscal year, management decided to implement a cost-based analysis of their operations, leading to a thorough review of every department's expenses and revealing areas where savings could be realized without sacrificing quality.