Let's say my cost price for a part is $10, I need to charge 20% sales tax, and I want to sell it to make a 50% net margin, what would be the calculation to work out the price I'd need to charge a customer?
I know I would need to sell for \$30 because...
-\$5 is tax
-\$10 cost price
= $15 net profit
= 50% net margin.
I worked it out through intuition/trial and error, but what would be the calculation to know for a product of \$10 and a 50% net margin I'd need to charge \$30?
Many thanks.
Let the selling price be $s$ and the pre-tax price be $p$. $p + 0.2p = s$, so $1.2p = s$, or $p = \frac{s}{1.2}$.
Then you have only is $s-(p+10) = s - (\frac{s}{1.2} + 10) = s - \frac{s}{1.2} + 10$ dollars left in profit, which is half of your selling price $s$. Therefore:
$$s - \frac{s}{1.2} + 10 = \frac{1}{2}s$$ $$10 = \frac{1}{2}s - s + \frac{s}{1.2}$$ $$10 = (\frac{1}{2}-1+\frac{1}{1.2})s$$ $$\frac{-10}{1/2 - 1 + 1/1.2} = s$$ $$s = 30$$