Subject: profit margins
Name: Beverly
Who are you: Parent

Our costs to make a product is $73.00. We want to sell this product and make a 30 percent profit margin. What is the selling price? What is the simple formula to follow? Is there a chart we can go to that shows us these percentage of profit breakdowns

 

Beverly,

To find the profit margin as a percentage take the net income (that is revenue minus expenses) divided by revenue and then multiply by 100. In other words it is the profit as a percentage of the revenue. To develop a formula let R be the revenue, C the costs and P the profit margin, then

 (R - C)/R x 100 = P

In your situation you have C = $73.00 and P = 30% so

 (R - 73)/R x 100 = 30

Solving for R gives

(R - 73)/R x 100 = 30
(R - 73)/R = 0.30
R - 73 = 0.3R
0.7R = 73
R = $104.29

Penny

Supplemental from Sue:

Hi Beverly.

You can view your problem this way: I'll be selling my product for some price (call it R). 30% of that price should be my profit, so that means 70% of the price is what it costs me to make it. 70% is just another way of saying 0.7, so

0.7R = $73
If you divide both sides by 0.7, you get
R = $104.29

Stephen La Rocque.>