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How to calculate cost price where margin percent and selling price is given?

Anonymous
2013-08-18T08:31:37+00:00

If selling price is $20.00 with profit margin of 20%.

How do I write the formula to find out the cost price?

Thank You

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HansV 462.6K Reputation points
2013-08-18T09:13:36+00:00

The cost price will be selling price - 20% of the selling price.

So with the selling price in A1 and the margin in B1, the formula is

=A1-B1*A1

You can also write it as (100%-20%) of the selling price:

=(100%-B1)*A1

or, if you keep in mind that 100% is the same as 1:

=(1-B1)*A1

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  1. Anonymous
    2013-08-18T13:05:28+00:00

    Hans,

    Sorry to disagree but Margin is based on Cost

    Sell = Cost*(1+Margin)

    So Cost = Sell/(1+Margin)

    Cost = A1/(1+B1)

    Try Sell = 20, Margin = 20% gives Cost =16.67

    best wishes

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  2. Anonymous
    2015-11-20T18:15:28+00:00

    This answer is correct.  Cost = A1/(1+B1)

    The other one is not.

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  3. Anonymous
    2013-08-18T19:31:09+00:00

    Mea culpa! I apologize for my ignorance.

    Now I know the meaning of "margin", thanks

    best wishes

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  4. HansV 462.6K Reputation points
    2013-08-18T13:52:03+00:00

    I found the following definitions and used them as basis for my reply:

    "Profit margin is calculated with selling price (or revenue) taken as base" (http://en.wikipedia.org/wiki/Profit_margin)

    "Margin (on sales) is the difference between selling price and cost. This difference is typically expressed either as a percentage of selling price or on a per-unit basis"

    "A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. (...) For example, if a company's gross margin for the most recent quarter was 35%, it would retain $0.35 from each dollar of revenue generated"

    "Profit margin is displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales."

    (Italics are mine)

    But I'm not an economist, so I can't judge whether all those definitions are incorrect.

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