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How can I calculate selling price from cost and GP?

 
 
Tilburyboozer
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      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.
 
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Bernard Liengme
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      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
best wishes from Canada
--
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.



 
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Gordon
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      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

 
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Gordon
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      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!

 
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Roger Govier
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      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!


 
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Bernard Liengme
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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!



 
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Gordon
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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.........

 
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Roger Govier
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      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.........


 
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Gordon
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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....

 
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Roger Govier
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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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