9 Replies Latest reply: Jul 29, 2014 11:37 PM by Eduardo Sommer RSS

    How to set list price from cost ?

    PAUL YEO

      Hi All

       

      I want to know how to set my list price . So when I give discount amount I know my Gross profit from cost price.

       

      For example now my cost price = 100 and I set list price as 200. ( base on mark up 50 % ) 100 / 0.5=200

       

      If I give customer 200 with discount 10 % (200 × 0.9=180 )it is hard for me to know how many profit I make . Because profit is cal base on cost.

       

      GP % = (180-100)/180=80/180= .....

      I lost and confusing. ..

       

      Paul

        • Re: How to set list price from cost ?
          Eduardo Sommer

          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 ?
              PAUL YEO

              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

                  Hi Paulo

                   

                  If you have a Markup M and a Discount D, you can calculate your Gross Profit % (GP%) as

                   

                  GP% = ((M+1) * (1-D) - 1) / ((M+1) * (1-D))

                   

                  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 ?
                      PAUL YEO

                      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

                       

                       

                      Sent from Samsung Mobile

                       

                       

                        • Re: Re: How to set list price from cost ?
                          Eduardo Sommer

                          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) * (1-D) -1) / ((1+1) * (1-D))

                          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