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How do you calculate selling price of a product with cost and margin, while taking into account discount and rebates offered to the customer?
Download Excel file for product price calculation, if you would like to practice while watching the video: [ Ссылка ]
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If you have tried this calculation of selling price of a product which requires not only the calculation of markup as you only have margin %, but also complicating the calculation are the discount and rebate factors, you may have ended up seeing a Circular Reference error in Excel. This is because the Selling price needs to be calculated, but discount and rebate / commission are also calculated based on the selling price. So, we end up in a circular loop. In this video, I will show you how computers and Excel can help.
Microsoft Excel comes with a built in Solver add-in that does the calculation for you. The Solver Add-in is an advanced version of the Goal Seek function and can even consider constraints to the calculation. All you need to do is to set up the product cost calculation template in a way that the Solver Add-in can do the calculation for you. If you had to do it on your own, you would have to use the trial and error method. But with the Excel Solver Add-in, you don’t have to worry, as it is very quick and easy to calculate selling price of a product so that you can achieve the target margin as well as consider discount and rebates and commissions (if applicable). So, if you are provided with, say discount of 1% and rebates of 3% that the customer would usually be able to claim, you can consider this in the product pricing decisions, and with the help of this calculation, you can calculate exactly the price you need to sell for, in order to still achieve the margin % that was originally required.
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Hope you find the information in the video helpful. If you like to watch more videos in accounting, financial analysis and controller ship, videos that help you directly in doing your job, subscribe to my channel. If you liked the video, I would love if you could LIKE it and leave a comment. If you have any questions or feedback, again leave a comment. Lets stay connected at #learnaccountingfinance #sellingprice #profitmargin
