Dictionary / Cost-Plus
What does Cost-Plus mean in accounting?
Quick definition
GeneralA term indicating a method of determining the selling price of goods produced or services performed under a contract whereby the cost of the goods or service is increased in the amount of a profit equal to an agreed increment to such cost. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
Cafe remodel billed as cost plus a fee
You run a custom millwork shop. On March 6 you sign a job with a cafe: bill actual cost plus a $3,500 fixed fee. Through April 12, walnut from a hardwood supplier and shop labor total $14,800, so you invoice the cafe $18,300 in QuickBooks Online. Leave the $14,800 in job materials and wages so the job P&L shows the $3,500 increment as the agreed profit. Attach the signed cost-plus clause to the invoice.
A lump-sum bid stays at the bid
On July 9 you bid the reception desk at a veterinary clinic as a $6,400 lump sum and win. Materials and labor later total $8,050 after a late veneer change, but you still invoice $6,400, the bid, not cost plus an increment. That is a fixed-price contract; do not reopen the Xero invoice to add a percentage just because costs moved. Cost-plus applies only when the signed job says the selling price is actual cost plus an agreed increment, so the extra $1,650 is a bid loss, not a true-up.
Why it matters
Cost-plus is a contract way to set the selling price: actual cost of the goods or work, plus an increment you both agreed to, a fixed fee or a percent. You will not post this most months unless you regularly take jobs that way; it shows up when you sign work that refuses a locked bid price. The neighbor term cost-plus pricing is just the habit of adding a markup to costs, with or without a signed formula. Treat a fixed-price job as cost-plus after costs move, or invoice a markup you never agreed in writing, and you bill the wrong amount and the job P&L stops matching the contract.
Further reading
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What is Cost-Plus in bookkeeping?
A term indicating a method of determining the selling price of goods produced or services performed under a contract whereby the cost of the goods or service is increased in the amount of a profit equal to an agreed increment to such cost.
When should I use Cost-Plus?
Use Cost-Plus when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Cost-Plus?
Cost-Plus is used for cost-plus entries, while C&F covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.