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Solution of determination of Cost and Sale price

Problem


Dear Sir,

I have a doubt related to Costing of certain Items we import.We used to import Cages from other Countries like China,Italy etc.
As every body know we incurred certain Direct Expenses while importing.My doubt is How can I allocate these expenses to those items and How much Percentage of Profit I can add to those items.

List of Items :-


Say our Expenses comes around like these:

Customs Duty
4879
DP Charges
35
Storage
415
Printing & stationery
115

Rent

2740
Transportation
1787
Refreshments
16
Unloading
2000
Total Expenses till products reached our Store:
11987


Purchases for 35 varieties of Cages


172102
Here by,How can I allocate all these expenses to those 35 Various items and How can I or How much Percentage of Profit I can add to those various items.

As I know what my manager is doing is :

Purchase value * 10% + Purchase Value * 150% = Selling Price.
ie:150*10%=165
150*150%=225

Total=390 is the Sales value of an Item which has the Purchase price of 150.

Is this a correct Solution.Please advice me in this.Please give me a Correct solution.


Solution


I saw your inventory . There are many pieces in one type of items . For calculating sale price of every item , we can use differential pricing system . Because of list price like book selling is not given , so you can add 10 to 30% margin add in every item .

But Again , I could not understand how your manager add first 10% margin and then 150% of original cost . In general market there is no trend to add total 160% margin on cost .

or you can also use following method . But because I have seen average cost per pc very high difference , so possibility of applying following formula is too limited .

When you receive the goods from other countries , all the expenses will be the part of Total cost of product . So , we will calculate total cost

Value of purchase + Value of the Expenses of Import

You did not mention , what is your finished product and is there any other indirect expenses or not . If there are indirect expenses , we have to include in it and calculate total cost .

After this we can calculate per unit cost of product

= Total cost of product / Total units of product

Different business have different profit margin . It depends on large number of factors like , product's life cycle , demand , supply , competitive strategy and product mix . But normally it may be 10% to 50% of sale

You can estimate sale value by applying following formula

= Cost + Total cost of products X Profit margin rate / 100 - rate

sale price per unit = total sale value / total units

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Accounting Education: Solution of determination of Cost and Sale price
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