Gross Margin Calculations

(I keep having to phone a friend on this - so by writing it down; I can come here in future...)

If we have:

• cost (C) = £50
• We want to achieve a Gross Margin (M) of 30% (that is 0.3)
• Then what will have as a sell price (P)

The answer is:

   P = C / (1 - M)
     = 50 / (1 - 0.3)
     = 50 / 0.7
     = 71.43

This can be verified by calculating the margin as:

   M = (P - C) / P
     = (50 - 71.43) / 71.43
     = 0.3

Or lastly:

   C = P * (1 - M)
     = 71.43 * (1 - 0.3)
     = 71.443 * 0.7

     = 50