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Tarun Suthar

 • 

The Institute of Chartered Accountants of India • 11h

How to Calculate Product Cost, Set Profit & Selling Price - Using a Cost Sheet 🤔 Ever wondered how businesses actually price their products? It all starts with one simple but powerful tool: the Cost Sheet. 🚀🔥 Here’s how it helps: 1️⃣ Calculate Product Cost First, prepare your cost sheet with all components: ✅️ Direct Costs: Raw material, labour, direct expenses ✅️ Indirect Costs: Factory overheads, admin, selling & distribution Then use this formula: Cost per Unit = Total Cost / Number of Units Produced 2️⃣ Decide Your Profit Once you know the cost per unit, set your desired profit margin: Profit = Cost per Unit × Desired % Example: If your cost is ₹100 and you want a 20% profit, Profit = ₹100 × 20% = ₹20 3️⃣ Set the Selling Price Now just add the profit to the cost: Selling Price = Cost per Unit + Profit ₹100 (cost) + ₹20 (profit) = ₹120 Selling Price 4️⃣ why It Matters? You never underprice and lose money You never overprice and lose customers You make decisions based on numbers, not guesses

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