Marketing Pricing Formulas

Unit cost
unit variable cost (AVC) + total fixed costs
divided by unit sales (AFC)
Mark up price
unit cost (ATC)
divided by (1 – mark up % on sale)
Mark up price alt.
unit cost
divided by (1 – desired return on sales)
Mark up % on sale
(marl up price (unknown) – unit cost)
divided by mark up price
Mark up % on selling price
mark up % on cost
divided by (100% + mark up % on cost)
Mark up % on cost
mark up on price
divided by (100% – mark up % on selling price)
Breakeven in units
total fixed costs
divided by fixed cost contr. per unit
fixed cost contr. per unit
price – AVC (unit variable cost)
Breakeven in $
breakeven in units (x) selling price
Breakeven in $ alt.
total fixed costs
divided by contribution margin
contribution margin
(price – variable cost)
divided by price
desired sales $
(fixed cost + profit goal)
divided by contribution margin
desired sales in unit
fixed costs + profit goal
divided by contribution per unit
if profit goal is stated as a percent of sale, not dollar amount… the desired sales in units
fixed costs
divided by ((price – variable cost) – (markup % on sales (x) price))
markup chain
(suggested retail price – retail margin)
(retailer’s cost/wholesaler’s price) – wholesaler’s margin
contribution per unit
(price – variable cost)
net sales
gross sales revenue – returns and allowance
(returns and allowance = trade, cash, quantity, and promotion allowances)
cost of goods sold
sometimes called cost of sales
-actual cost of the merchandise sold by a manufacturer or reseller.
-it includes the cost of inventory, purchases, and other costs associated with making the good
gross margin (gross profit)
(net sales – cost of goods sold)
operating expenses
the expenses incurred while doing business
-these include all other expenses beyond the cost of goods sold that are necessary to conduct business
net profit before taxes
profit earned after all costs are deducted
gross margin percentage
gross margin
divided by net sales
net profit percentage
net profit
divided by net sales
operating expense percentage
total expenses
divided by net sales