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Joined: Jul 2004
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If you have a job with a total cost of $237.79 and you wanted a net profit of 20% on this job what would your selling price need to be?
A. $285.35 B. $297.24
How many out there would say A? How many out there would say B?
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Joined: Oct 2004
Posts: 265
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Net profit technically is revenue - all costs including as taxes, overhead, depreciation on trucks, etc. Don't know if your number includes that.
A. $285.35 = 237.79 * 1.20 B. $297.24 = 237.79 * 1.25
But Net Margin = profit / revenue. Profit for A = 285.35 - 237.79 = 47.56 Profit for B = 297.24 - 237.79 = 59.45
Net Margin for A = 47.56 / 285.35 = 16.6% Net Margin for B = 59.45 / 297.24 = 20%
[This message has been edited by dmattox (edited 12-16-2004).]
[This message has been edited by dmattox (edited 12-16-2004).]
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Joined: Jul 2004
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The $237.79 includes all costs including overhead. There are no other costs. My answer is B.
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Joined: Feb 2003
Posts: 687
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Joined: Jul 2004
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The reason I posted this was I was talking to another guy who said that you multiply the net profit desired by the actual costs of the job.
$237.79 x .20 = $47.56 $237.79 + $47.56 = $285.35
I told him the correct method would be to take the desired net profit percent subtract that from 100% and divide your actual costs by this percentage.
100% - 20% = 80% $237.79 / .80 = $297.24
So I thought I would post it to see how others would calculate this.
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Joined: Oct 2004
Posts: 265
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I think an easy way to explain it to him is that he is making profit 20% of his costs, you are making profit 20% of your revenue.
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Joined: Jul 2004
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Good point. Thanks for the replies.
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Joined: Aug 2004
Posts: 106
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Thanks for the "new Math" lesson. Another contractor tried to explain this to me last year and I couldn't quite get it. After reading these posts,I started dividing instead of multiplying. ![[Linked Image]](https://www.electrical-contractor.net/ubb/biggrin.gif)
Power to the people
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Joined: Apr 2001
Posts: 507
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Our company has allways used method B.
I wasn't sure that the boss was doing it right and dug out some old college business management textbooks from the basement.
Both methods are correct, they are just different. I am now happy using method B.
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Posts: 47
Joined: March 2008
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