While all business owners want to make a profit on every product they sell, it is not always possible. You may buy some items for resale thinking that customers are going to buy the items quickly, only to find out that the item is not selling at all. In addition, some items you did not think would sell, you cannot keep in stock. Knowing your profit margins on the items you sell allows you to determine what price you can set on each item to remove slow sellers from inventory while maintaining profitability.
Things You'll Need
- Your price list
Look at your invoice to determine how much you paid for an item. For example, if you bought a case of widgets for $27, that is the cost.
Divide the cost of the case by the number of single items in the case. For example, if the case of widgets contains 12 individual widgets, divide $27 by 12 to determine that each individual widget cost you $2.25.
Look at your price list to see how much you charge for the item.
Subtract the cost of the item from your price for the item. For example, if your price for a widget is $3, your profit margin on widgets is $0.50 each.
Multiply your profit margin by the number of items in the case to determine your amount of profit by the case. For example, $0.50 times 12 equals a profit margin of $6 per case.