Q. How to find a gross retail price which includes an agents or sales rep commission or fee by marking
up my net price or how to get a selling price that includes a discount added in
.
Get a gross retail price to include a discount
Work out a price to include Sales Rep's markup  
Method to add in an agent's commission
 


How to Add Commission

Q. You have a base price for your product or service. You wish to pay commission to an agent for selling the item. This is a percentage off a marked up retail price which, when deducted, leaves you with your original base price.

The WRONG way is add the commission percentage on to your base price and then take it off again. ie. £100 + 15% = £115. 15% off £115 = £97.75 You LOOSE 2.25%!

A. This is the calculation you need to use when:
you know a price before commission (the Base price)
but want to find out the price including commission (the Retail price).

If we assume that commission is at a rate of 15%...

Base price

divided by

0.85

= Retail price

eg. 150.00

divided by

0.85

= 176.47


Proof:-

Retail price

=

176.47

Less 15% commission

=

26.47

( 176.47 x 0.15 )

Base price
=
150.00
 

In the equation above, 0.85 is the divisor. To get the divisor, we need to split the retail price which is made up of 15% commission rate which leaves 85% for the base price. This base % is converted into a fraction by dividing it by 100 = 0.85. ( % or percent means 'per hundred' and 'per' in maths means 'divide by' )


Another example:

If we wish to offer a 30% discount off an unknown retail price we will need to divide our base price by the remaining 70% , which expressed as a fraction
= 70/100 = 0.7.
Thus the divisor is 0.7

Let us assume that our base price is say 2,850.00
What is the Retail price ?


Base price

divided by

0.7

= Retail price

eg. 2,850.00

divided by

0.7

= 4,071.43


Proof:-

Retail price

=

4,071.43

Less 30% discount

=

1,221.43

( 4,071.43 x 0.3 )

Base price
=
2,850.00
 

For a compound commission or discount structure ...

Build up the retail price in stages taking the current retail price as the next base price and so on. That way you can offer a commission structure of say 10% of all sales for the Sales Manager; Sales Reps get 25% of sales and can give discounts of Less 30% for Trade Less 2.5% to settle in 30 days; Your favourite charity gets 1% of sales; and so on.

Deducting tax or markup from a price - a task some people find difficult

For more information on taxes and Value Added Tax ( vat )

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last modified : 5th. October 2011


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