How do i do costing for goods i want to sell? what are the factors to take into consideration when doing it.?
Answers:
Not only are labor and materials factors, but location (rent), tools , licenses, and any other misc costs.these falll under 'overhead'
Figuring profit is trickier than you think. adding 20% of cost doesn't yield 20% profit. Profit is properly figured on selling price. To make 20% profit, you must add 25% to cost.
To find correct selling price to gain a certain net profit;
Add the percentage of cost of doing business (total production cost) and the desired % of profit. Subtract this from 100. Divide the cost by this remainder.
Ex; total cost of producing a purple scruple = 6.00
desired profit (in percentage) = 25%
25+6=31>>>>100-31=69>>>>6.00/. or 8.70
Generally speaking, 25% of cost added onto cost yields 20% profit, 33 1/3% equals 25% profit, 100%+cost=50% profit
well there are several factors and it really depends on your transaction. But here is a generalized version:-
1. The cost at which you buy (inclusive of taxes) +
2. Transportation to where you will store the goods +
3. Storage charges+
4. transporation to your client+
5. Transaction is on cash or credit basis. If credit then Interest calculated should be added as your costing.+
6. Any other service provided by you during delivery or otherwise relating directly/ indirectly to the transaction+
7.Your profit margin.
Not all these things might be applicable to you. But you can pick the ones which are.
you have not mentioned about the business manufactureing or tradeing
for tradeing
FOB cost or CIF
purchase price
add..freight
insurance
taxes,duties & etc
commisdon for clearence
transport from port yard to warehouse
invisible expenses
after above all, add the Overhead expenses. rent, power, telephone,wages,advt & etc
then add the profit margin
Then you arive the final MRP
The general rule of thumb for a reseller is that your prices needs to be about 3 times your cost. This will cover all the things you mentioned, plus returns, warehouse damage, insurance, etc.
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