In India, there are lots of business person who already fix the profit % on total sales. On this basis, they have to calculate the sales price. In accounting, it is just like to find specific sales price, if you have the specific profit margin.
Following are its Simple Steps :
1. Fix the Profit Margin
First of all, you have to fix your profit margin. It may be 5%, 10%, 15%, 20% or 30% or any means it may be 50% also.
2. Calculate the Cost with specific profit margin
Calculate the Cost. Just subscribe the profit margin from 1
3. Calculate the Actual Cost of Per Unit
It is not difficult. You have to record the cost of raw material. You have to record labour cost. Record the cost of direct expenses and indirect expenses for producing specific quantity of goods. If you want to produce specific quantity, you can also allocate the overhead cost. Now, total cost will be divided by no. of units. With this, you can find cost per unit.
4. Calculate the Specific Sales Price
For calculating the specific sales price per unit, you have to divide actual cost per unit with cost with specific profit margin.
For Example :
You want to get 20% profit on sale. It means, your specific profit margin is 0.20. It means, your cost with specific profit margin is 1- 0.20 = 0.80. Your actual cost per unit is Rs. 1.30.
Now Specific Sales Price for getting 20% profit = 1.30 / 0.80 = Rs. 1.63 per unit
If you sell your produced products at RS. 1.63 per unit, you will get 20% profit margin.
- How to Calculate Sales Volume
- How to Compute Selling Price
- Solution of determination of Cost and Sale price