Question

Suppose 5 items are sold at 10% markup. After generating sales it is found that variable fees have eaten up the profit on some items.

Example:

Item #1:
    price = 11.00
    cost = 10.00
    fees = 1.34
    desired change = 12.34

Item #2:
    price = 16.50
    cost = 15.00
    fees = 2.00
    desired change = 18.00

Item #3:
    price = 55.00
    cost = 50.00
    fees = 2.50
    desired change = N/A

Item #4:
    price = 33.00
    cost = 30.00
    fees = 4.65
    desired change = 35.65

Item #5:
    price = 27.50
    cost = 25
    fees = 1.25
    desired change = N/A

Is there a formula I can use to calculate the percentage increase to make a profit on all items based on average profit lost on prior sales?

I am not stellar at formula and the way I was going to write this algorithmically reeks of inefficiency. I’m sure this should be simple but my head cold is making it hard to figure out either way.

Answer 1

Not sure if this is too simple-minded for what you have in mind, but let’s say we have

P = purchase price (total for all items) 
M = Markup (profit) factor  (0.1, or 10 percent initially, in your case) 
V = variable fees  (the cost that eats up your net profit)

Then you want to ensure that the following equation is true

P * M - V >= 0

which is the same as

P * M >= V

which is the same as

M >= V / P

So, say your total purchase is $1000, and your ‘variable fees’ are $200, then your profit ratio should have been at least $200/$1000 = 0.2, or 20 percent.

Are you trying to calculate the price hike you would have to impose to recoup the loss you’re already incurred?