# Raise prices 1%, increase sales 1% and cut costs 1%, by what percentage will

• Sep 6th 2011, 02:28 PM
ronb
Raise prices 1%, increase sales 1% and cut costs 1%, by what percentage will
If I could get some help with this -

If you raise prices 1%, increase sales 1% and cut costs 1%, by what percentage will profits increase?

I would like the formula that proves the correct answer so I can understand how it works.

Thanks!
• Sep 6th 2011, 02:31 PM
TKHunny
Re: Raise prices 1%, increase sales 1% and cut costs 1%, by what percentage will
You probably should define a base.

Unit Price = Unit Cost + Unit Margin
Total Profits = Total Sales - Total Costs
• Sep 6th 2011, 02:55 PM
ronb
Re: Raise prices 1%, increase sales 1% and cut costs 1%, by what percentage will
Lets say the Unit Cost is \$1.00 and sells at \$2.00.

Total sales = \$100.00 and Cost = \$50.00
Profit = \$50.00

So from here - If you raise prices 1%, increase sales 1% and cut costs 1%, by what percentage will profits increase?
• Sep 7th 2011, 03:03 AM
SpringFan25
Re: Raise prices 1%, increase sales 1% and cut costs 1%, by what percentage will
Do you know how to do percentage calculations?

Is "increase sales" referring to sales value (\$) or sales volume (units)?
• Sep 7th 2011, 04:58 AM
Wilmer
Re: Raise prices 1%, increase sales 1% and cut costs 1%, by what percentage will
Quote:

Originally Posted by ronb
Lets say the Unit Cost is \$1.00 and sells at \$2.00.
Total sales = \$100.00 and Cost = \$50.00
Profit = \$50.00
So from here - If you raise prices 1%, increase sales 1% and cut costs 1%, by what percentage will profits increase?

p = precentage increase (?)
k = selling price (2)
c = cost (1)
i = raise:cut percent (.01)
Let u = 1+i and v = 1-i
General case formula:
p = 100[u(ku - cv) / (k - c) - 1]

p = 100[1.01(2*1.01 - 1*.99) / (2 - 1) - 1] = 4.03 %