Gross Profit Margin Pricing

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How do you calculate a gross profit margin price?

Calculate a selling price by dividing the cost by 1 minus the profit margin percentage.

If a new product costs $70 and you want to keep the 40 percent profit margin, divide the $70 by 1 minus 40 percent – 0.40 in decimal. The $70 divided by 0.60 produces a price of $116.67.

Formula to calculate Selling price using Gross Margin

  1. Selling Price = Cost / (1-GM%)
  2. 40% Margin. For example, if your product costs $100 and the required gross margin is 40%, then your Selling Price = $100/(1-0.4) = $100/0.6 = $166.6.


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