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Math Help - Price increase question

  1. #1
    Newbie
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    Aug 2010
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    Price increase question

    Hello all

    I'm not Math major or a Math champ but just a guy doing a retail store business. Would like to know how much the sales volume has to increase when price is reduced by a certain % keeping the same profit if my margin is 5%,10% and 15%. I got the file from a old page which had no explanation how they figures came up. If someone can explain me the concept I would like to do this in excel.

    Thanks!
    Attached Thumbnails Attached Thumbnails Price increase question-03-05-2012-23-24-50.jpg  
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  2. #2
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    Re: Price increase question

    Anyone?
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  3. #3
    MHF Contributor
    Joined
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    Re: Price increase question

    Let's start with a simple example:
    1000 (sales) @ 30% (margin) = 300 (revenue)
    1250 (sales) @ 24% (margin) = 300 (revenue)

    Sooooooo...in order to get SAME revenue:
    if margin=30% and is reduced by 6% (30% - 24%),
    then sales must increase by 25% (1000 * 1.25 = 1250).

    Go check above in your attachment:
    you'll see above result clearly in 3rd column, 3rd row.....

    Formula is quite simple:
    c = current margin (30)
    r = reduction to margin (6)
    i = increase in sales (?)

    i = c / (c - r) - 1

    So (above example):
    i = 30 / (30 - 6) - 1
    i = 30/24 - 1
    i = 1.25 - 1
    i = .25 or 25%

    If you want result to come out as 25% instead of .25:
    i = 100[c / (c - r) - 1]

    Let me know if you need more info...hope that helps...
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