Hi there,
Does anyone know the formula to workout what price to achieve a desired profit margin, if only the total cost and profit margin are given?
E.g. Fixed Costs: £10,000 Variable Costs: £200 Desired Profit Margin: 30%
I've seen elswhere online this formula: Cost/(1- Desired Profit Margin). But I'm unsure if "Cost" in this formula refers to Variable Costs, Fixed Costs or Total Costs? I'm aslo unsure whether I need to know the sales volume or not.
Many thanks!
For anyone else who is preparing for case interviews, I’ve put together this material that covers virtually all the formulas you need:
Best,
Cristian
Hi,
I don't think you can not solve it without knowing the quantity or revenue.
You could solve it however if 30% was the gross margin.
Best,
