Optimizing Pricing for Profit: A Guide to Setting Marked Prices with Discounts

SEO stands for Search Engine Optimization, which is crucial for improving your website's visibility on search engines like Google. Properly optimized content helps in better ranking and attracting more organic traffic. In this article, we will explore a practical example of how to set a marked price for an item so that a desired profit margin is achieved after allowing a discount.

Introduction to Cost, Profit, and Discount

Let's start with a basic understanding of the three key elements involved: cost price (CP), selling price (SP), and discount. The cost price is the price at which an item is bought, the selling price is the price at which it is sold, and the discount is the reduction in the selling price offered to the buyer. The goal is to set the marked price in such a way that even after the discount, the desired profit is achieved.

Example: Setting Marked Price for a 25% Profit after a 5% Discount

Suppose a dealer buys an article for Rs. 380.00. To achieve a profit of 25%, let's break down the steps required to determine the marked price (MP) at which the article should be sold after allowing a 5% discount.

Step 1: Calculate the Cost Price (CP)

Given: CP Rs. 380.00

Step 2: Calculate the Desired Selling Price (SP) for a 25% Profit

To find SP, we use the formula:

SP CP (Profit% of CP) SP 380 (0.25 × 380) 380 95 475

Step 3: Calculate the Marked Price (MP)

The dealer allows a 5% discount on the marked price. This can be expressed as:

SP MP × (1 - Discount Rate) 475 MP × (1 - 0.05) 475 MP × 0.95 MP 475 / 0.95 500

Therefore, the dealer should mark the price at Rs. 500 to achieve a 25% profit after allowing a 5% discount.

Alternative Methods for Profit Calculation

There are different ways to calculate the marked price depending on whether the profit is based on the cost price or the selling price.

Example 1: Profit on Cost Price

Given: CP Rs. 360 Profit 25% Discount 10%

Step 1: Calculate the selling price (SP) for a 25% profit on cost price.

SP CP (Profit% of CP) 360 (0.25 × 360) 360 90 450

Step 2: Calculate the marked price (MP) before the discount.

SP MP × (1 - Discount Rate) 450 MP × (1 - 0.10) MP × 0.90 MP 450 / 0.90 500

Hence, the marked price should be set at Rs. 500 to achieve a 25% profit on cost price after a 10% discount.

Example 2: Profit on Selling Price

Given: CP Rs. 360 Profit 25% Discount 10%

Step 1: Calculate the marked price (MP).

MP (100 Profit%) / (100 - Discount%) × CP (100 25) / (100 - 10) × 360 MP 125 / 90 × 360 500

Therefore, the marked price should be set at Rs. 500 to achieve a 25% profit on the selling price after a 10% discount.

Conclusion

Setting a marked price for an item involves a careful calculation to ensure that a desired profit is achieved even after a discount is applied. The examples provided illustrate how to use different approaches to determine the marked price based on profit on cost price or profit on selling price. Understanding these calculations is essential for any business owner or marketer aiming to optimize their pricing strategies and improve their profit margins.