
Re: How to set list price from cost ?
Eduardo Sommer Jul 29, 2014 12:04 AM (in response to Yeo Poh sai)Hi Paul,
Your calculation is right: GP% = (Price  Cost) / Price * 100. In your case, 80/180*100, which gives us 44.44%
You only forgot to multiply by 100.
Eduardo

Re: How to set list price from cost ?
Yeo Poh sai Jul 29, 2014 3:54 AM (in response to Eduardo Sommer)Hi Edu
Thank for clear my confusion.
My actual objectives :
1. I create a list price base on cost mark up 50 %.
2. Now when sales staff give discount 10% from list price coy earn 44% Gross profit.
My question is how to let staff easy relate 10% equal GP% 44 ?
Paul

Re: How to set list price from cost ?
Eduardo Sommer Jul 29, 2014 9:35 AM (in response to Yeo Poh sai)Hi Paulo
If you have a Markup M and a Discount D, you can calculate your Gross Profit % (GP%) as
GP% = ((M+1) * (1D)  1) / ((M+1) * (1D))
So, in our case, where your markup is 1 (100%) and the discount is 0.1 (10%), we will have:
GP% = ((1+1) * (1  0.1)  1) / ((1+1) * (1 0.1))
GP% = ((2 * 0.9)  1) / (2 * 0.9)
GP% = 0.8 / 1.8
GP% = 0.4444
GP% = 44.44%
Does this answer your question?
Eduardo

Re: How to set list price from cost ?
Yeo Poh sai Jul 29, 2014 10:33 AM (in response to Eduardo Sommer)Hi Edu
I don't have issue on cal the GP% Given the List price and Discount.
My issue is how to let the user know if he given certain discount to customer . What it the GP % ?
As the relationship between the mark up % and discount % and GP % are not not easy to remember.
My question is it is possible to make it easy remember.
For example mark up 50 % after give discount 10% , logically should be 40% , but it turn up 44 %.
As I like user to know if he want to hv GP % 30% , he can only give X % discount.
My point is I want to make it easy remember. .. but I think it is not possible. Because for markup I base on cost and for discount I base on Selling price.
Paul
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Re: Re: How to set list price from cost ?
Eduardo Sommer Jul 29, 2014 11:17 AM (in response to Yeo Poh sai)You're right, Paul
The only thing that I disagree is that your markup is 100% and not 50%.
The discount is apllied on the Selling Price. But, the selling price is a function of cost and markup. So, my equation for the Gross Profit % is based only on markup and discount.
With my equation, you can solve the question of what discount gives you a Gross Margin of 30%, assuming a markup of 100%.
GP % = 0,3 (30%)
M = 1 (100%)
0.3 = ((1+1) * (1D) 1) / ((1+1) * (1D))
after some steps, you will have D = 0.2857 (28.57 % as discount)
The attached spreadsheet shows the effect of Markup and Discount on the Gross Profit.
Eduardo

Gross Profit Percent.xlsx 178.0 K

Re: How to set list price from cost ?
Yeo Poh sai Jul 29, 2014 11:39 AM (in response to Eduardo Sommer)Hi Edu
Assume cost price = 100
Markup 10 % = 100/.9=111.11
Mark up 50% = 100/.5=200
Mark up 80% = 100/.2=500
Mark up 90% = 100/ .1=1000
I don't know mark up 100 % equal what.....It is infinity ?
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Re: How to set list price from cost ?
Eduardo Sommer Jul 29, 2014 12:42 PM (in response to Yeo Poh sai)Hi Paul
I think you're confusing mark up with gross margin. Mark up is the amount you sum to the cost to obtain the list price. So, when you have a cost of 100, and you add 100%, you obtain a list price of 200.
Gross margin is what is left when you take the cost from the list price. In this case, when your price list is 111.11 and your cost is 100, you have a gross margin of 10%.
A mark up of 100% is equivalent to a gross margin of 50%.
In fact a gross margin of 100% is only possible if you have a cost of zero.
Eduardo

Re: How to set list price from cost ?
Yeo Poh sai Jul 29, 2014 10:54 PM (in response to Eduardo Sommer)Hi Edu
You are very good in your excel skill , as i just read abt the excel file you created.Also you are very clear on cost and selling price and GP % formula.
I think you are accountant ?
Paul

Re: How to set list price from cost ?
Eduardo Sommer Jul 29, 2014 11:37 PM (in response to Yeo Poh sai)No, Paul. I'm not an accountan I work iwith IT for 36 years and I like to play with numbers, and this Gross Profit, Gross Margin, Cost and Price confusion occurs very often.
Regards
Eduardo







