Figuring Material Cost

Discussion in 'Business Operations' started by wakesetter2001, Apr 23, 2007.

1. wakesetter2001LawnSite Memberfrom Sunriver, OregonMessages: 77

How do you all figure material cost. Say you want to make 30% on all you materials. You have a \$16.00 plant and you want to sell it for the 30% profit. I take the \$16 and multiply it by 30% then add the 16 back on.

16x.3=4.8
4.8+16=20.80

Is this correct because now I hear I am doing it wrong and should take the \$16 and Divide it by 70%

16/.7=22.86

What is everyone else's take on this subject.

2. Big M LawnnSnowLawnSite Memberfrom Belle MeadMessages: 217

Yup that is the way to do it.
16x.3=4.8
4.8+16=20.80 is correct

3. bulletheadLawnSite Senior Memberfrom TexasMessages: 273

No its not correct, if you want to make a 30% Gross Margin - It is \$22.86 - \$16.00 = \$6.86, \$6.86 (Gross Margin)/\$22.86 (Sales Price) = 30% Gross Margin Percentage: so taking your cost and dividing it by .7 is the correct way to get a 30% gross margin or gross profit

If you use \$4.80/\$20.80 = you only get a Gross Margin or Gross Profit of 23%

Taking a cost number and multiplying it by 1.3 gives you a 30% MARKUP, but it does not give you 30% gross profit or gross margin.

Good question that is often misunderstood.

4. wakesetter2001LawnSite Memberfrom Sunriver, OregonMessages: 77

Anyone else, I have one for and one against, so what does everyone else do.

5. prosperityLawnSite Memberfrom North Central PennaMessages: 92

bullethead is correct - do the math.

6. RunnerLawnSite Fanaticfrom Flint, MichiganMessages: 13,497

That is correct, but if you aren't doing 41%, you aren't in business.