So far so good. Are you still with me? This lesson is what this class is all about. Coming up with a profitable retail price. What do I mean by profitable retail price? Well, a retail price that puts money into your pocket, rather than taking it out.

We now know we can use three different ways to calculate a retail price. So let's now calculate the retail price we'll get for the fabric crossbody bag, and the fabric cosmetic pouch using each method. Here are the formulas you need for each method. For the dollar figure method, it's as simple as adding $1 figure to the cost price. For the target margin. You'd need to initially deduct the margin you want to achieve from 100% to get the inverse margin and divide that into the cost of price.

For the markup method, you need to add the markup percentage you want to achieve to 100% and then multiply that by the cost price. So for instance, if you want to achieve a 50% markup, you would add 50% to 100% to get 150%. And then you would multiply that by the cost price. Let's say we want to achieve the $22 profit figure for the fabric crossbody bag. ease in the dollar figure method or would need to do is add $22 to $27 and 85 cents given us a retail price of $49 And 85 cents. If we want to achieve a 35% margin using the target margin method for the fabric crossbody bag, what would need to do is deduct 35% from 100%, which leaves us with 65% and then divide that 65% into the cost price.

This gives us a retail price of $42 and 85 cents. And for the third method, which is markup. If we wanted to mark up our bag by a crossbody bag by 100%. What would need to do is add 100% 200% which gives us 200% and multiply that by the cost price of the fabric crossbody bag. Which we calculated as $27 and 85 cents. This would give us a retail figure of $55 and 70 cents.

Doing the same exercise again, but this time for the fabric cosmetic pouch. For the dollar figure method, we want a profit of $5. Therefore, we add $5 to the cost price of $4 25 cents, giving us a retail price of $9 25 cents. The target margin method, we want to achieve a margin of 45%. So, we start off by deducting 45% and 100% which leaves us with 55% and dividing that into the cost price of $4 and 25 cents, which gives us a retail figure, a retail price figure of $7 and 73 cents and for the third method the market method, we've opted to go for a 200% markup on this product, which means we would add 200% to 100% given us 300% and multiplying that by the cost price of $4 and 25 cents, which gives us a retail price figure of $12 and 75 cents.

These figures are exclusive of any taxes. Speaking of tax in most countries outside of the US, such as Australia, the UK and other European countries. tax is included in the price you see on the shelf, rather than added at the checkout. I currently live in Australia, and the tax rate known as the GST, which stands for the goods and services tax is 10%. And this is the tax rate. I'm going to use Coming up with the retail price increases of taxes.

In the UK, it's known as value added tax, which is abbreviated to VAT and is currently charged at 20%. In the US, it's the sales tax. It's also worthwhile noting that the tax charged would not affect the margin calculation. As margin is calculated net of tax. Here's how we add tax to the retail price. We've got a retail price figure exclusive with tax.

So using the dollar figure method for the fabric crossbody bag, we came up with a retail price of $49 and 85 cents, we now need to increase that by 10%. To do that, we're going to add 10% to 100% to come up with 110% and multiply that by $49 and 85 cents. This gives us retail price inclusive of tax of $54 and 84 cents. During the same calculation again, we have the retail figure exclusive of tax, we're going to add the 10% tax by multiplying that retail figure by 110% gives us a retail price inclusive of tax of $47 and 13 cents for the target margin method. For the markup method, we came up with a retail price figure of $55 70 exclusive tax by adding tax. We have a retail price including tax of $61 and 27 cents.

We'll also do this for the fabric cosmetic pouch. So the $9 25 figure we came up with these The dollar figure method becomes $10. At inclusive of tax, the 773 we came up with using the target margin method becomes $8 50, inclusive of tax. And the $12 75 figure we came up with these and the markup method becomes $14 and three cents inclusive of tax. One more thing on taxes before we move on, please speak to your accountant who will advise you on how to pay these taxes when they become due. Let's move on now.

For resale price we get inclusive of tax requires some tidying up as they're not attracted to the eye $14 and three cents $10 and 18 cents $47 and 13 cents just don't look quite right. Nor does it roll off the tongue easily to do this Begin to round the prices to a price points customers are used to seeing. This type of pricing method is called psychological pricing, and suggests there are certain numbers we respond to better than others. So 1199 looks better than $10 and 18 cents. When rounding, use the pricing structure you tend to see the most within your retail sector. For instance 990-911-9914 99 instead of $10 13 $11 58 or $15 10.

And be aware by rounding the retail price the final gross margin rate would be affected. You can choose to either round up or round down the retail price. So $10 and 18 cents can be either 999 if you want to round down, or $11 99 if you round up Do not round to 1099 as having prices in multiples of 10 for prices under $100 isn't visually appealing or attractive to customers. How many times do you see a product for $40 and 99 cents. Here's how I've rounded the fabric cosmetic bag and fabric cosmetic pouch prices for each of the three methods used for the fabric crossbody bag. Using the dollar figure method, I'm rounded $54 and 84 cents to 5499.

Using the target margin method, I rounded $47 13 to 4999. For the markup method, I rounded $61 and 27 cents to $64 99 for the fabric cosmetic pouch, using the dollar figure method around $10 18 cents to $11 90 nine cents for the target margin method. I rounded $8 50 up to $8 99. And for the markup method, I rounded $14 and three cents up to $14 99 cents. Now to check your product is profitable. This is done by calculating the gross margin dollars and the gross margin percentage.

The gross margin dollar figure is calculated by subtracting the cost price from the retail price excluding tax. It is very important to use retail price excluding tax in this calculation as the tax needs to be paid to the government. Its margin percentage is calculated by taking the gross margin dollar that has been calculated and dividing that again by the retail price excluding tax. Once you have that figure, you multiply it by 100 to convert it To be a percentage by making each product sold profitable, we're trying to ensure there is enough money left over after costs are paid. To cover all the other business related expenses here are the gross margin dollar and rate for each of the methods used to calculate the retail price for the fabric crossbody bag and the fabric cosmetic pouch using the dollar figure method for the cross body bag, where we increased the retail price by $22.

And we rounded the retail price inclusive of tax to 5499. Our gross margin dollars comes out at $22 and 14 cents and our gross margin rate comes to 44.3% target margin. Margin dollars is $17 60. And our margin rate is 38.7% using Mark margin dollar is $31 and 23 cents and our margin rate is 52.6%. For the fabric cosmetic pouch using the dollar figure method where we increased the cost price by $5 and rounded the retail price to $11 99. Our gross margin dollar is 665 and our margin rate is 61%.

Target margin gross margin dollars works out at $3 92 cents at a rate of 48%. And by marking up the cost price by 200% and rounding up the retail price to 1499. Our gross margin dollar works out to be $9 and 38 cents At a margin rate of 68.8%