Subject: Re: Understanding the Pricing Formula
Date: Sun, 23 Jun 2002 08:36:32 -0400 (EDT)
From: Jack Porcello
Your first mistake is that you are confusing mark-up with gross profit.
If you mark up your cost 50%, then your final selling price reflects a
gross profit of 33.33%. If your cost is doubled, then your gross profit
is 50%.
For example:
Your Cost - 20 seashells
Selling price - 30 seashells
Mark up - 10 seashells
As you can see, your mark-up of 10 seashells is one half (50%) of your
actual costs. The 10 seashells mark-up is one third of your selling price
of 30 seashells. Gross profit is the relation between the mark-up amount
(10 seahells) and the selling price (30 seashells), or, in this case,
33.33%.
Your cost - 20 seashells
Selling price - 40 seashells
Mark up - 20 seashells
When you double your actual costs, you end up with a selling price that is
half costs and half profit. So half (50%) of your selling price is gross
profit. Therefore, an 100% mark up will give you a 50% gross profit.
Hope this helps,
Jack Porcello
Balloon HQ
> ----- Original Message -----
> > If we use the formula that has been suggested by QBN then the actual
> > selling price of this item would be $40.00. Now if we just take 50% of the
> > $20.00 which is $10.00 and add that to the $20.00 the selling price is now
> > $30.00.