When estimated costs are used in applying the cost-plus approach to product pricing, the estimates should be based on normal levels of performance.

Estimated Costs

Projected expenses that are forecasted for future activities or projects.

Cost-Plus Approach

A pricing strategy where a fixed percentage or amount is added to the cost of producing a product or service to determine its selling price.

Normal Levels

Typical or expected conditions or ranges within which processes or operations are considered to be functioning optimally.