1. Limited time only! Sign up for a free 30min personal tutor trial with Chegg Tutors
    Dismiss Notice
Dismiss Notice
Join Physics Forums Today!
The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

How to Calc Selling Cost When % Cost Added To Sell Price?

  1. Dec 7, 2009 #1
    Hi All,

    I have a costing problem, that seams simple but I must be missing something.

    We buy a product for X and we want to make a certain margin on this product, say %M. We have postage costs say P and finally we have a transaction fee that is charged at the total sell price. So this fee is making it difficult for me to calculate what I need my sale price to be as when I increase the sale price so does the transaction fee.

    What I would really like is a formula, so I can put this in our costing sheet on excel.

    Any help would be greatly appreciated.

  2. jcsd
  3. Dec 7, 2009 #2


    User Avatar
    Science Advisor

    It's just a matter of adding in the all of those additional costs. The orginal cost to you is M and you want to make a profit of r% of M (I wouldn't say "margin" as that usually includes things like postage and "transaction fees"). That means your price would have to be M+ .01rM= M(1+ .01r). Now add postage and transaction fees to that. If the profit is to be, say, 10% of the price, postage is $0.50, and transaction fees are $2.00, then you should charge (1.1)M+ 2.50.
  4. Dec 7, 2009 #3
    Thank you for your reply, but thats not what im after. Sorry I probabily did not explain it very well.

    M= margin %
    P= Paypal Transaction Fee
    S = Sell Price
    R = Postage

    What I would like to do is calculate in my price the sell price to include the margin and all costs.

    If for instance I want to make 10% on a product that costs £10 and £2 to post. It would be this

    (10+2)x(1+0.1) = £13.20 now if we sell at £13.20 then paypal will charge 3.9% +£0.2.

    £13.20 *0.039+0.2 =£0.5148. If I then add this to £13.20 to try and cover all costs I get
    £13.20 + £0.5148 = £13.7178.
    If I then calculate this as sold again and paypal taking their fee it is know £13.71 *0.039+£0.2=£0.7348. as this shows, the current method I have not going to work.

    I have tried playing with transposing the formula to get a good model for our spreadsheets, but I am just not knoledgable enough at maths.

    Any suggestions please.
  5. Dec 7, 2009 #4


    User Avatar
    Gold Member

    You have a product, it's 10.00
    It costs 2.00 to ship

    You want to make a 10% margin on it:

    12.00 * (1 + 0.10) = 13.20

    Pay pal will charge you 3.9% + 0.2

    13.20 * (1 + 0.039) + 0.2 = 13.9148

    That number is what you want to charge the customer.
  6. Dec 7, 2009 #5
    but 13.9148 * 3.9% +0.20 = 0.7424
    0.7424-13.9148 = 13.1723
    I have lost 3p out of the margin?
  7. Dec 7, 2009 #6


    User Avatar
    Science Advisor
    Homework Helper

    I think I understand what you're asking.

    Call the base price B = X + R. You want to mark this up by some amount to get A, the price you tell PayPal; you then get to keep 0.961A - £0.20. (0.961 = 100% - 3.9%.) Your profits are π = 0.961A - £0.20 - B. You want π = M * A.

    Set the two equal to each other:
    0.961A - £0.20 - B = M * A

    Move everything with A to one side and the rest to the other:
    0.961A - M * A = £0.20 + B

    Factor the left:
    A(0.961 - M) = £0.20 + B

    A = (£0.20 + B) / (0.961 - M)

    This is the price you should sell at. In your example, B = £12 and M = 0.1, giving A ≈ £14.17.
  8. Dec 7, 2009 #7


    User Avatar
    Gold Member

    Ahhh I'm sorry, my mistake. CRGreathouse has it right.
  9. Dec 8, 2009 #8

    I have tried using the formula and found it is closer without the 0.20....

    I have attached a spreadsheet, to check the costing and it is approximatley 1% out across a range of examples.

    Please see attached

    Attached Files:

  10. Dec 11, 2009 #9
    Any ideas?
  11. Dec 11, 2009 #10


    User Avatar
    Science Advisor
    Homework Helper

    The formula is exact (with the 0.2); your spreadsheet calculates the margin wrong. The sell price $14.17 and the profit $1.4170, thus 10% margin.

    If you want 10% markup rather than 10% profit, you can derive a different formula fairly easily -- just follow my method in post #6.
Share this great discussion with others via Reddit, Google+, Twitter, or Facebook