Gary is showing you the recipicol way of getting gross profit which is the way we look at it. Since just about every mfg has a suggested list price that has a 40% gross profit margin, this would be calculated by
10.00 divided by .60 = $16.67 for a 40% profit margin. Some mfg's will round it up to $16.70 or $16.75.
For the purposes of applying escalators, it would be simple to state that if you were to make a 40% gross profit margin on everything you sell, then you would simple state
Cost + 67.00 would equal "suggested retail" at a 40% profit margin.
Thus, if you were to escalate your sale price to
Cost + 75.00 you would be saying the same as
List + 8.00 or a 43% gross profit margin.
In the example above, your list price would be $17.50 instead of $16.67. You then would divide $7.50 profit into the $17.50 sale price to achieve the 43% gross profit margin.
Basically, the same as Gary is stating from a starting point of Cost + 67.00 equals mfg suggested list price.
Chuck Hartle'
[This message has been edited by Chuck Hartle (edited 11-18-2002).]