# How can I calculate selling price from cost and GP?

Tilburyboozer
Guest
Posts: n/a

 4th Nov 2008
We have a pub, and we really need to keep a close watch on profit margins. I
have a formula for calculating the GP from nett cost and selling prices [
which is 1-(cost price/sales price) ] but my maths lessons are nearly 50
years back, and I can't work out how to calculate the price we need to charge
in order to make the right margins.

A younger memory will solve this in seconds, I know, so please lend a hand.

Bernard Liengme
Guest
Posts: n/a

 4th Nov 2008
Rearranging GP = 1-(cost price/selling price) gives
selling price = cost price /(1- GP)
The word 'maths' suggests UK - I got my 'O' level math in 1954!
So please check this with some data
I wonder if I ever visited your Tilbury pub
--
Bernard V Liengme
Microsoft Excel MVP
http://people.stfx.ca/bliengme
remove caps from email

"Tilburyboozer" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> We have a pub, and we really need to keep a close watch on profit margins.
> I
> have a formula for calculating the GP from nett cost and selling prices [
> which is 1-(cost price/sales price) ] but my maths lessons are nearly 50
> years back, and I can't work out how to calculate the price we need to
> charge
> in order to make the right margins.
>
> A younger memory will solve this in seconds, I know, so please lend a
> hand.

Gordon
Guest
Posts: n/a

 4th Nov 2008
"Tilburyboozer" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> We have a pub, and we really need to keep a close watch on profit margins.
> I
> have a formula for calculating the GP from nett cost and selling prices [
> which is 1-(cost price/sales price) ] but my maths lessons are nearly 50
> years back, and I can't work out how to calculate the price we need to
> charge
> in order to make the right margins.
>
> A younger memory will solve this in seconds, I know, so please lend a
> hand.

Not sure where you have got this formula from as a recently retired
Management Accountant it makes no sense at all!

The formula you need is a re-arrangement of this:

GP=SP-COS.
In other words what you want to calculate SP is SP = GP + COS

where GP=Gross Profit, SP= Selling Price and COS= Cost Of Sales.

COS is usually the direct cost to you of your goods for sale, but may
contain other items such as direct labour (bar staff etc etc)

HTH

Gordon
Guest
Posts: n/a

 4th Nov 2008
"Bernard Liengme" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> Rearranging GP = 1-(cost price/selling price) gives
> selling price = cost price /(1- GP)

I don't know where the OP got this from. As a recently retired Management
Accountant I have NEVER seen it expressed that way and in fact have
considerable doubts that it would give the correct answer!

the proper way is this:

GP = SP - COS (Cost of Sales)
No division there anywhere!

Roger Govier
Guest
Posts: n/a

 4th Nov 2008
Hi

I believe what the OP is referring to Gross Price not Gross Profit. He wants
to know how to calculate the Sale price he needs to achieve a given level of
Gross Profit percentage.
The formula that Bernard gave him is correct, but GP in the formula must be
expressed as a percentage figure.

With the level of Gross Profit expressed as a % in cell A1, e.g 45%
Enter the title for the Product in A2 downward e.g. Bitter, Lager, Gin,
Whisky etc
Cost price for each Product in B2 downward,
then enter in C2
=B2/(1-\$A\$1)
and copy down as far as required.

Column C will give the Gross Price he needs to sell each product for, in
order to achieve the Percentage as expressed in cell A1

--
Regards
Roger Govier

"Gordon" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> "Bernard Liengme" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed)...
>> Rearranging GP = 1-(cost price/selling price) gives
>> selling price = cost price /(1- GP)

>
> I don't know where the OP got this from. As a recently retired Management
> Accountant I have NEVER seen it expressed that way and in fact have
> considerable doubts that it would give the correct answer!
>
> the proper way is this:
>
> GP = SP - COS (Cost of Sales)
> No division there anywhere!

Bernard Liengme
Guest
Posts: n/a

 4th Nov 2008
His formula amounts to (Sell price - Cost price)/Sell price
So it is the percentage of the Selling price that is profit, I would think
But then I'm a chemist
best wishes
--
Bernard V Liengme
Microsoft Excel MVP
http://people.stfx.ca/bliengme
remove caps from email

"Gordon" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> "Bernard Liengme" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed)...
>> Rearranging GP = 1-(cost price/selling price) gives
>> selling price = cost price /(1- GP)

>
> I don't know where the OP got this from. As a recently retired Management
> Accountant I have NEVER seen it expressed that way and in fact have
> considerable doubts that it would give the correct answer!
>
> the proper way is this:
>
> GP = SP - COS (Cost of Sales)
> No division there anywhere!

Gordon
Guest
Posts: n/a

 4th Nov 2008
"Bernard Liengme" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> His formula amounts to (Sell price - Cost price)/Sell price
> So it is the percentage of the Selling price that is profit, I would think
> But then I'm a chemist
> best wishes

The OP didn't mention GP PERCENT.........

Roger Govier
Guest
Posts: n/a

 4th Nov 2008
Well, only the OP can answer what he really wanted.
But, from all the pub landlords I know, they all %GP being the % margin on
Sales.
What the OP asked for, was how can he calculate his selling price, from his
cost and GP.
In those circumstances, I believe the interpretation I made is correct - but
who knows!!!

--
Regards
Roger Govier

"Gordon" <(E-Mail Removed)> wrote in message
news:#(E-Mail Removed)...
> "Bernard Liengme" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed)...
>> His formula amounts to (Sell price - Cost price)/Sell price
>> So it is the percentage of the Selling price that is profit, I would
>> think
>> But then I'm a chemist
>> best wishes

>
> The OP didn't mention GP PERCENT.........

Gordon
Guest
Posts: n/a

 4th Nov 2008
"Roger Govier" <roger@technology4unospamdotcodotuk> wrote in message
news:uO%(E-Mail Removed)...
> Well, only the OP can answer what he really wanted.
> But, from all the pub landlords I know, they all %GP being the % margin on
> Sales.
> What the OP asked for, was how can he calculate his selling price, from
> his cost and GP.
> In those circumstances, I believe the interpretation I made is correct -
> but who knows!!!
>

The point being, that if the OP uses SP = GP + CP, then he KNOWS how the
three inter-relate in an accounting scenario, which is what he's in. The
1-(GP/CP), although it may produce the correct answer is NOT an accounting
function, it's an arithmetical function....

Roger Govier
Guest
Posts: n/a

 4th Nov 2008
I am going to give up on this futile argument (as Accountants are always
right, aren't they<bg>), but since when has
SP = GP + CP
not been an arithmetical function?
All accounting is based on arithmetical functions.

--
Regards
Roger Govier

"Gordon" <(E-Mail Removed)> wrote in message
news:ur48#(E-Mail Removed)...
> "Roger Govier" <roger@technology4unospamdotcodotuk> wrote in message
> news:uO%(E-Mail Removed)...
>> Well, only the OP can answer what he really wanted.
>> But, from all the pub landlords I know, they all %GP being the % margin
>> on Sales.
>> What the OP asked for, was how can he calculate his selling price, from
>> his cost and GP.
>> In those circumstances, I believe the interpretation I made is correct -
>> but who knows!!!
>>

>
> The point being, that if the OP uses SP = GP + CP, then he KNOWS how the
> three inter-relate in an accounting scenario, which is what he's in. The
> 1-(GP/CP), although it may produce the correct answer is NOT an accounting
> function, it's an arithmetical function....

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