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how do you calculate the percentage markup based on selling price
Answer #1 for Questions: how do you calculate the percentage markup based on selling price
First we will have to do a profit percentage comparison with our gross profit margin by our own selling price
Now I like a lot of folks will compare my own prices and that of the other business for this reason, not because we get ripped off but to make ourselves fair. Now our wholesale cost is $10.50/bag of weed and our average bag cost will be $30.00 each, because it does change as per the quantity that are ordered. So the profit % (profit margin percentage) for our $10.50/bag will be 50%, because our wholesale cost is half of the selling price which makes the markup 50%. But if we multiply the gross profit percentage of our new selling price, $30.00/bag, to be 50%, we get .5x .5, which is the profit %, the markup of 50%. For the $10.50/bag of weed that we do in the 1st quarter of our first season which has sold 940 bags. Which means that we are marking it up 50%, because our selling price was half of the quantity price for a $10.50 price. As a side note the last bag that were placed in a 1/10th kilo is going to be shipped back to them, now on a 1/10th kilo which is only 60 dollars more, a 30$ profit. Our wholesale cost still be 10.50 and our quantity will be 100 now we will have a new selling price and it’s 10.50 plus 100, so the price has doubled with a 20% markup or even more for sure because I already went from the half bag to the whole bag.
Let’s do this a bit more thoroughly with the 1st bag in this example. The wholesale cost is 50 cents/bag and this one is half as we have just gotten 5 bags instead of 10 bags so it will be a new gross margin or profit % of 50% so .5 x .5 = 25% for a quarter bag to 10 bags sold of 100.
Next we compare our profits to all our retail store’s costs which we can have up to $4 per bag. In our state it is illegal to resell marijuana, so the markup per each retail is equal to the wholesaler’s cost divided by each of our state specific bag amounts.
So for 1 bag of 5 bags we will mark up the retail 5 times so we get 4, .95
Since all the stores are selling an additional bag of 10 or more, for each one, we will apply the same gross margin percentage of 50% to all of our bag prices.
So our bag for the year to the end of year on 1/10th kilo, where our gross profit margin was a whopping 40% and $4.50.
So by multiplying the 2nd bag’s gross profit margin with our own and the new bag we will multiply this total up and see the increase in percentages of .8 for 1/10th kilo and $5 bag and .6 for 1/10th kilo and $7.50 and so on until our bag of 1/10th kilo where our own wholesale markup was 5x at a $50 selling price.
Here are all the gross profit margins:
.1/.05 bag $10.50
.1/.10 bag $12.25
.1/.20 bag $13.63
.1/.50 bag $14.30
.1/.75 bag $15.00
.1/.01 kilo $19.00
Now since we bought at $30 per bag and we paid $30 for the next 5 bags or 30% of the next 50 bags which should be a lot. We will sell each bag at this rate. So for our example $5 kilo bag will sell for 30x = .30
Now multiply the 1/10th kilo wholesale by 30x or the new selling price $16.00.
.1/.10 bag 10x$16.00 .5/.10 bag. 5x$16.00 1/10 kilo$16.00
.01 kilo x 30x$19.00
What this means is this: We bought at 50% margin and we will mark up to make 60% to give us a $16.00 profit on our $30 wholesale cost
Now when the bag sells for 10 times our wholesale cost it is a $40 profit, we didn’t do it for any kind of a trick just to show you how this works and I did do this all the time. So that there was a very high margin for us
So now we compare this to other businesses. Most business are charging $1.50 or $2.00 over their own prices and even more. We don’t get ripped off because we are all very fair and just don’t do any kind of hocus pocus when comparing ourselves. So in this sense all business are ripping us off and not so much as I was previously led to believe
We could see it in how we got charged for the 3rd bag in the 1/10th kilo when our wholesale cost of 50 cents or $5.50 had been inflated to $5.00 with other fees so our profit per bag went down to .5 for the 2nd bag and $7.50 for the 3rd bag to $5.00 so $10 for a 3rd bag. However since our new selling price was $5.00 this $5 bag was selling at a higher rate than before with the $5 bag mark up and our margin had went from a 50% gross margin up to 55% gross margin from 5 bags in a 1/10th kilo to 10 bags in a 1/10th kilo and $7.50.
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