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How to derive a simple profit equation. Kinda embarrassing.

  1. Nov 15, 2014 #1
    I made this excel file that is basically a calculator. It needs to create a Total price after fees, profit and supplier cost. Most profit margin calculators have you add a percentage for profit... this is not what I want. I have a hard dollar amount.

    You must know that the entire transaction includes supplier cost, profit and fee. The fee is charged from the total of the Transaction. I do not want to brute force until I find a total price that equals 5 bucks in profit.

    For instance...

    Supplier Cost : $50
    Profit I want to make : $5
    10% Transaction Fee : ?
    Total to charge : Some unknown without brute force.

    Currently you put the Supplier cost and a GUESS of the Total price. And keep adjusting while watching your profit until it gets to $5 bucks.


    So here is an example....

    Enter Supplier cost..... ___$50___
    Enter Profit to make.... ___$5____

    With this info I need it to spit out the total to charge so that the money left in the account is enough to
    *pay supplier
    *Pay transaction fee
    *And exact profit of $5 is what is left.

    In this case...
    *Fee is: $6.11
    *Total price is $61.11

    Customer is charged 61.11 and we pay a transaction fee and a profit. It should zero out.


    Does this make sense?
     
  2. jcsd
  3. Nov 15, 2014 #2

    SteamKing

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    Science Advisor
    Homework Helper

    Have you tried algebra?

    You know:

    T = total price

    X = transaction cost

    F = transaction fee = 0.1 * X

    F + X = T or 0.1 * X + X = T, which means

    1.1 * X = T

    X = T / 1.1

    X = Cost + Profit = T / 1.1

    So Profit = (Total Price / 1.1) - Cost

    Something like this?
     
  4. Nov 15, 2014 #3
    The problem is we have 2 unknowns: Transaction fee and Total Price.

    Fee can be derived from Total Price.
    Total price can be derived from Fee + Cost + Profit

    We only have Cost and Profit

    Basically, I could write a brute force method in Java, but I just think there is some math I do not understand. Probably because there is 2 missing variables. Fee and Total.


    Edit: I looked at your math and I am unsure it does what I am trying to do. Maybe I am missing something. Thank you.
     
  5. Nov 15, 2014 #4

    Mentallic

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    You have two variables, but you also have two equations that relate those variables.

    S = supplier cost
    P = profit to make
    F = transaction fee
    T = total price

    So we have that

    T = S+F+P

    We know S and P, so they're constants, so we have two variables in that equation, T and F.
    The other equation is:

    0.1*T = F

    So then if we plug 0.1*T for F into the first equation, then we get

    T = S + 0.1*T + P

    solving for T,

    T - 0.1*T = S+P
    (1-0.1)T = S+P
    T = (S+P)/0.9

    and then plugging this value for T back into the second equation, we get

    0.1*(S+P)/0.9 = F

    So your two results are

    T = 10/9*(S+P)
    F = 1/9*(S+P)

    You can easily generalize this procedure so that you can use any % in your transaction fee that you wish.
     
  6. Nov 15, 2014 #5
    Wonderful! Thank you both for the time and effort not only does this work, but I understand it completely. I also added a way to change the percentage on the calculator. Wonderful!
     
  7. Nov 15, 2014 #6

    Mentallic

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    Homework Helper

    Well of course it works, it's Math ;)

    That's good to hear!
     
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