Working out trade prices

[mrvillicus]

Due to my complete mathematical incompetence im still (after 3 weeks) struggling with trade prices. To be honest it's quite embarrassing, I mean how hard can it be?!

What I currently do is give a percentage discount on the total order amount, basing the percentage on what the customer would make when using my RRP's, however isn't it normal practice to simply offer a percentage discount on each item?

For example, I sell 3 different sizes of my product, so would'nt it be better to calculate trade prices on a per item discount? Say I pay x amount, then I take 40% off my RRP and there you have it, a trade discount price?

 

[swankypants69]

So (taking VAT out of the equation), if you have an item that RRPs at £100, and you want your customer to make 40% profit (ie. 40% profit on return), you multiply the RRP of the item by 0.6 which gives you the cost price to the customer

If VAT is included in your RRP, work out your ex VAT RRP then with that number do the above calculation (to work out the VAT included in your RRP simply divide your RRP by 6, this gives you the VAT element of the RRP)

RRP £100 offer 40% discount gives a wholesale price of £60

RRP £100 including VAT

100/6 = £16.67 VAT
100-16.67= £83.33 ex VAT RRP
83.33 x 0.6= £50 price to charge customer

These are all based on profit on return and not a percentage mark up

As a quick ready reckoner as a retailer for VATable items, I take the ex VAT price and double it to give me a 40% POR (ie £10 ex VAT cost, £20 retail inc vat gives me a 40% POR£

I think those figures are correct, please someone correct me if I'm wrong!

 

[swankypants69]

Also, if I want to my profit to be 50% of my total VAT inclusive selling price I take my ex VAT cost and triple it

So ex VAT cost £10 gives £30 selling price inclusive of VAT, the VAT element of this is £5 giving me a £15 cash profit