Assuming an anticipated profit of 25% profit on the selling price, a 5% price increase would mean how much % of the current sales if the same profit is to be retained?
I really dont know how to go about this one. Can somebody help?
Thanks
Assuming an anticipated profit of 25% profit on the selling price, a 5% price increase would mean how much % of the current sales if the same profit is to be retained?
I really dont know how to go about this one. Can somebody help?
Thanks
There is a difference between "absolute profit" and "profit margin". My calculation shows how to maintain the same "profit margin".
sales quantity 100 100
price per produc €100 €105
cost per produ €75 €75
total turnover €10.000 €10.500
total costs €7.500 €7.500
total profit €2.500 €3.000
profit margin 25% 29%
To maintain €2.500 profit, you need to sell 83,3 products.
absolute_profit = quantity *( price_per_prod - cost_per_prod)
and therefore
quantity = absolute_profit / ( price_per_prod - cost_per_prod)
= 2.500 / (105 - 75)
= 83,33333
=> 83,333%
Include the increase %:
absolute_profit = quantity *( (1 + increase%) * price_per_prod - cost_per_prod)
quantity = absolute_profit / ( (1 + increase%) * price_per_prod - cost_per_prod)
So (e.g.) to maintain 2.500 profit
quantity = 2.500 / ((1 + 0,05) * 100 - 75)
= 2.500 / ((1,05) * 100 - 75)
= 2.500 / (105 - 75)
= 2.500 / 30
= 2.500 / 30
= 83,333 => 83,3%