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Cost To Profit Calculating

I have been asked on many occasions, as to how much should be charged for a product and how to figure the actual cost per item. You could purchase one of the many spread sheet calculators that are available online, but I myself prefer the do it yourself method.
First you will need to know the cost of each ingredient that will be used to make your finished product. Take the cost of each ingredient, with shipping and any taxes added, and divide it by the amount of each product.

We do have a cost calculator to help you figure your exact cost per oz, lb, teaspoon etc. Here

7lbs of grape seed oil @ $17.10 with $3.00 shipping = $20.10 total cost.
Divide $20.10 by 7 for a total cost of $2.87 per lb.
Now divide $2.87 by 16 for a total cost per ounce of .18
You can save 1 step by dividing $20.10 by 112, which is the total ounces for 7lbs.
16 x 7 = 112, since there are 16 ounces in a pound, as far as I remember.

Because most recipes use ounce's as a measurement I always break all of my cost's down to cost per ounce. Do this for each ingredient used in your finished product.
Now that you know the cost per ounce for each ingredient, add up the cost of each for the size batch you have made and divide it by the total weight in ounces.
A 5lb batch will weigh 80 ounces, 5 x 16 = 80
Divide the total cost of all of the ingredients for that particular batch by 80, and you will have your total cost per ounce. Multiply that by the bar size.
4oz bar multiplied by your cost per ounce = total cost per bar without packaging.

There are several different methods of arriving at a retail price. Use a multiplier on your cost price to achieve the desired margin. For example, to achieve a 33% profit margin use a 150% (1.50) multiplier. $300 x 1.50 = $450.00 Selling Price, with a profit margin of 33% Another way to express the difference is that a markup percentage of 50% only yields a profit margin percentage of 33%. Markup, defined as the percentage added to cost to arrive at a selling price, is commonly used to price materials. If you want to mark up an item 50%, you add 50% of the item's cost to the cost. However, as noted above, a 50% markup DOES NOT yield a 50% profit margin! It is important that you utilize margin and markup properly.
Here are 3 methods that should help.

Profit Margin Method
If the cost for an item is $300 and you want a 30% profit margin:
$300 minus 30% = 70% or .70)
$300 divided by .70 = $428.57
Cost Price divided by % margin = Selling Price

Using a Base Overhead Factor(BOF)
This method helps to cover your overhead expenses, and include them into the Selling Price.
It ranges from 1.25% to 5%. The same margin with the BOF method, in this case 5%, would be as follows:
$300 minus 30% minus a the additional 5% = 65% or .65
$300 divided by .65 = $461.53 Selling Price

% Markup Method
If an item cost $300 and you want to add a 20% markup:
$300 X 20% = $60
$300 + $60 = $360 Selling Price
The actual margin on this item is less than 20%.
$360 minus $300 = 60, divided by $360 = 16.66% progit margin

Retail Price minus Cost Price divided by the Retail Price to give you the profit margin.

Mulitplier Chart

Markup %     Margin %        Multiplier %
20------------16.67%----------1.20
21------------17.36%----------1.21
22------------18.03%----------1.22
23------------18.70%----------1.23
24------------19.35%----------1.24
25------------20.00%----------1.25
26------------20.63%----------1.26
27------------21.26%----------1.27
28------------21.88%----------1.28
29------------22.48%----------1.29
30------------23.08%----------1.30
31------------23.66%----------1.31
32------------24.24%----------1.32
33------------24.81%----------1.33
34------------25.37%----------1.34
35------------25.93%----------1.35
36------------26.47%----------1.36
37------------27.01%----------1.37
38------------27.54%----------1.38
39------------28.06%----------1.39
40------------28.57%----------1.40
41------------29.08%----------1.41
42------------29.58%----------1.42
43------------30.07%----------1.43
44------------30.56%----------1.44
45------------31.03%----------1.45
46------------31.51%----------1.46
47------------31.97%----------1.47
48------------32.43%----------1.48
49------------32.89%----------1.49
50------------33.33%----------1.50
51------------33.77%----------1.51
52------------34.21%----------1.52
53------------34.64%----------1.53
54------------35.06%----------1.54
55------------35.48%----------1.55
56------------35.90%----------1.56
57------------36.31%----------1.57
58------------36.71%----------1.58
59------------37.11%----------1.59
60------------37.50%----------1.60
61------------37.89%----------1.61
62------------38.27%----------1.62
63------------38.65%----------1.63
64------------39.02%----------1.64
65------------39.39%----------1.65
66------------39.76%----------1.66
67------------40.12%----------1.67
68------------40.48%----------1.68
69------------40.83%----------1.69
70------------41.18%----------1.70
71------------41.52%----------1.71
72------------41.86%----------1.72
73------------42.20%----------1.73
74------------42.53%----------1.74
75------------42.86%----------1.75

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