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Price Formula Help

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!

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Top answer
on Apr 30, 2024
#1 Rated McKinsey Coach | Top MBB Coach | Verifiable success rates
Vlad
Coach
on Dec 21, 2018
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

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,

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