It is important not to confuse the term with “cost price”. The cost price is what the company pays to the supplier to manufacture or purchase a product, component or raw material. As the name suggests, the “cost price” in accounting is a cost factor, that is, the resources that a company uses to make something. In accounting, we express costs in monetary terms. When determining the profitability of a company, selling and cost prices play a role. If a company has a selling price lower than its cost price, it will subsequently suffer a loss. We can set this price at a minimum, a maximum or the average of both. We can set prices by season or season, region, demand and market. It`s also a good idea to look at what our competitors are doing. If the selling price and the cost price are almost the same, the company can reach the break-even point. Reaching the break-even point means not making a profit or loss, that is, a profit of zero. Let`s say a product costs the company $10 and wants to make a 20% profit? The selling price must be $12.5. See calculation below.

National or local regulations and laws may affect selling prices. This is one of the most important factors a company needs to determine. It is important because it can define the success of its survival. The price of a product directly affects its sales. This allows a company to better understand the demand. It looks at different periods or seasons and sets prices accordingly. Merriam-Webster defines the term as “the price at which something actually sells.” For example, the formula for gross profit is the selling price – cost price = gross profit. This can help a company set the selling price based on the expected percentage of profit. In some cases, companies may need to lower their prices in order to compete effectively in the market. In this context, the market means the same thing as the abstract meaning of “market”. The selling price of a product or service is the seller`s final price, that is, how much the customer pays for something.

The exchange can be made for a product or service in a certain quantity, weight or extent. There are several ways to determine the selling price. One way is to analyze the history of price sales. Another way is through formulas (formulas is another plural of formula). How much you sell something must be enough for you to make a profit. It must also secure a position in the market. Selling Price – Cost Price = SP Gross Margin – $10 = 20% SP 1 SP – $10 = 0.2 SP 1 SP – 0.2 SP = $10 0.8 SP = $10 0.8SP / 0.8 = $10 / 0.8 SP = $12.5 ($12.5 – $10) / $12.5) to achieve the desired gross profit (20%). .