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Cost price calculation

The cost price calculation is a simple but essential calculation to assess the viability of your business model. It helps you calculate your retail price and/or net margin. Your net margin determines whether you can grow your business. More margin is more growth potential, especially when your margin is higher than that of your competitors.

You can start at the beginning (costs of good sold) and add costs for handling, transport, storage, import duties, insurance, distribution, retail, discounts etc. or the end (list price, or retail price) and subtract amounts for discounts, retail, distribution, logistics etc. The gross margin you make covers taxes, marketing costs, overheads, interest and profit, 

You can do costs price calculations for different batch sizes, like 1000 pcs, 10.000 pcs 100.000 etc. or do it for different years. Playing with batch sizes and service models will help you find the best business model for your business. You can also check whether your costs compare with bench marks in your industry. Example if you ship unique goods from Bombay to Rotterdam and your shipping costs are higher than the price difference for those goods in Bombay and Rotterdam, you are better of buying in Rotterdam or your should check your shipping costs. 

 Cost price calculation each 1st year
or x1000
 2nd year or x 10.000 etc.
The list price minus av. discounts (excl. VAT)    
   minus costs for service and warranty    
   minus margin distribution and sales channel    
   minus outbound warehousing, insurance, freight,  
   handling, (import)duties and taxes. 
    
= the selling price    
   minus costs for sales and marketing               
   minus inbound storage and logistics     
   minus production or processing costs    
   minus costs of goods sold    
= gross margin    
   minus overheads    
   minus depreciation and amortization    
   minus capital costs    
 = NET MARGIN    

There is a good CPC in this part of the documentary Planet Money Makes a T/Shirt