How can I calculate selling price from cost and GP?

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Tilburyboozer

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.
 
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
 
Tilburyboozer said:
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.
Click to expand...


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
 
Bernard Liengme said:
Rearranging GP = 1-(cost price/selling price) gives
selling price = cost price /(1- GP)
Click to expand...

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!
 
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
 
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 Liengme said:
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
Click to expand...

The OP didn't mention GP PERCENT.........
 
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!!!
 
Roger Govier said:
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!!!
Click to expand...

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....
 
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.
 
No and it you asked him for "a pint" he would serve you beer without you
mentioning it!
Look at his equation - it obviously a ratio calculation.
 
MONTHLY FINANCIAL FORMULA:

Target SP (selling price) = VC(viariable cost) + FC(fix cost)

Example:

IF: VC is (includes the Staff Salary, labour, electric, water, gas, venture Food & Beverages)


SP = VC ($100,000) + FC (RENT-$20,000, OWN SALARY-$20,000, TAX-$5,000)

SP = $100,000 + $45,000

Selling Price = $145,000 / MO.


To Get the TARGET Daily GPA(Gross Profit Ave.) :

GP = SP / (No. of Days / Mo.)

GP = $145 / 30 Days

Target GP = $4.83 / Day


* Now make a feasibility study on how you can reach your Daily GP Target.
Do you need to adjust on your EXPENSES?
Do you need to get NEW COMPETITIVE IDEAS to increase your MARKET?

Goodluck :thumb: Focus, Be Resourceful, Get Ideas, Study, Act Act and Act,
Set & Accomplish your GOALS Everyday ! Make your DREAM a Reality!:cheers:


-Don Miguel Zobel de Ayala
Successful Business Man (Net Profit 2Million / Year)
20% of my income goes for the Church, Poor and Less fortunate.:D
 
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