TARGET COST CALCULATOR

Free Spreadsheet Model

Very often you'll have a good idea of the end-user sales price of an item you are making or buying for sale. But what's the maximum cost you can bear?

Well that depends on how long the supply chain is between you and the end-user, and if the end-user is a consumer or VAT-registered business.

And if you are importing, it also depends on the exchange rate, duty and any carriage costs you incur.

For example, let's say you are importing something that will sell for £5.99 inc VAT, you want to double your money, and the wholesaler and retailer will want 38% and 40% margin respectively. What price can you afford to pay?:

(a) £0.50
(b) £0.95
(c) £1.50

The answer is (b) 95p

And if the weakest exchange rate you envisage (or can lock in) is 1.60, with 8% duty and freight, you can pay up to 1.40 in foreign currency:

End-customer sales price 5.99  
Does this include VAT Y/N? Y 17.5%
End-customer price ex VAT 5.10  
     
Margin for final reseller / retailer 40.0% Set to 0% if selling directly to end-customer
Their buy price ex VAT 3.06  
     
Margin for second wholesaler   Set to 0% if no second wholesaler
Their buy price ex VAT 3.06  
     
Margin for first wholesaler 38.0% Set to 0% if no first wholesaler
Their buy price ex VAT 1.90  
     
Our own margin 50.0%  
Maximum cost ex VAT 0.95 made or bought
     
If importing:    
Exchange rate 1.60 home:foreign currency (set to 1 if buying in home currency)
Maximum cost in currency 1.52  
Duty and freight costs 8.0%  
Maximum purchase cost in currency 1.40  


If you would like a copy of the original spreadsheet model that allows you to put your own figures in the yellow boxes, just send us an email with "Target Cost Calculator" in the message

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