If you want to sell a product or offer a service to the public, it is very important to know the value of the product. Now you have to take into account all the companies and people who want to market the goods, because the profit you can make with that sale depends on it.
It is therefore more than necessary to obtain a viable product or service, which can also be described as production costs. To calculate the price of a product it is necessary to ask two questions: How much does it cost to manufacture a product? How much do I want to earn from this article?
The question is how much has been invested and how much of the goods sold you can get. Fortunately, Excel has the tools to help you calculate this value, so you know exactly how much you’ve invested and when to apply for it. In order to do this, you need to follow everything learned below very closely.
What should I take into account when calculating the product price in Excel?
In order to calculate the price of a product manufactured by you, you need several elements. The most important are the time you spend making the product and the money it costs you. Based on these two variables you can calculate the actual value of this element.
However, according to price theory, this can be calculated using the following formula:
- Total fixed costs + calculation of total variable costs = sum of fixed and variable costs
- Sum of your fixed and variable costs / estimated total production = unit costs.
By looking at the result of these formulas, it is possible to determine what percentage of the profit. In general, this percentage is usually 30%, but it can vary between 30% and 100%, depending on the seller. This way you can get the value you need to sell your product on the market.
However, in order to define all this you need to take into account the following aspects, which we will mention below:
- Estimate the market: If you have manufactured a product, it must be intended for the general public, it must meet the purpose of meeting the need or solving the problem. It is also important to know whether it is mainly aimed at older people, young people, women or men.
- Look what your competitors have to offer: All and absolutely all items sold on the market have competition, so it is a very good alternative to know the current price of your competitors. You will be able to see whether the price is high, reasonable or very low. Moreover, you can place a much more attractive price.
- Your product is simple or complex: If your product offered for sale is durable or not, you must take into account that it must be consumed quickly, which indicates that you must have a relatively low price on the market.
- Indicate the amount of your fixed and variable costs: Here you have to calculate the fixed monthly costs needed to market your products. In this case, the costs of electricity, water, telephone, rent, etc. must be taken into account. Whereas variable costs relate to the raw materials from which you produce your goods.
- Determine the profit percentage : If you cover all production costs, ask yourself how much you want to earn or when you estimate the actual value of your product. Among many other values, it is preferable to assign a profit margin percentage, either 30% or 40% – 15%.
Steps in calculating the cost of manufacturing a product in Microsoft Excel
The best way to calculate the manufacturing cost of a product in Excel is to use one of your templates as they have all the options you need to do it successfully. For example, if you are using a Microsoft program, you need to perform several steps:
The first thing you have to do is create a table with multiple columns, these must contain materials, the quantity used, the running costs, the total cost, . Please note that many other columns may be included in this calculation, depending on the product manufactured.
This means that, in order to calculate the cost of a product correctly, it is more than necessary to include all the materials used in its production.
To determine the total cost, you must use the FULL function. It will be applied to the User Cost column as soon as I know the price of all materials used.
To calculate your labour costs, you must multiply the number of hours invested in the production of a product or service. For this you need an hourly rate, which serves as a guideline for the price.
Then another table in Excel, in which all expenditures for the production of a service or product must be recorded, and again the TOTAL function is used to find the expenditures.
Once you know the cost of making the product, you need to apply the formula to calculate the distribution costs in Excel. To do this, you must place each of these data in a cell.
To calculate the cost of selling the product, it is necessary to apply a formula that adds all values in the product cost, the labour cost and the total cost cells. So you know the price of the product.
Another possibility is to create a Nueva table where each column has these fields. This way you can easily make additions without having to use Excel formulas to perform a mathematical operation. Once this value is reached, it is multiplied by the percentage of the profit you wish to make.
It is important that you receive a wholesale and retail price at this point. Keep in mind that the same costs should bring you reasonable benefits so that your business can be profitable and continue to grow. Don’t forget to set a fair and constant percentage so that you don’t get overpriced or underpriced. If the number is very high, you may not have that much money.
If you have any questions, please leave them in your comments, we will contact you as soon as possible and this will certainly help more members of the community. Thank you very much.
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