Question about what to charge for my dog cookies?

Question by Cheese: Question about what to charge for my dog cookies?
I have started to make dog cookies and a local retailer is interested in buying them. They want to mark them up 40%.What is the formula I would use to figure out how much to charge the retailer for my cookies. Their price for my cookies would be $ 5.00 retail.

Best answer:

Answer by startingover2011
Well, strictly speaking from the mathematical standpoint given their markup, you would charge ( $ 5 / 1.40 ) = $ 3.57 per pack.

But from a managerial accounting perspective, this is a cost-volume-profit scenario. There’s not really one magic formula. I think you should try to charge more, like say $ 4 per pack. If they don’t want to buy too much (your volume of sales) at that price (cost to them), then you lower your price. If they DO want to buy at that price and YOU are making your desired level of profit, them ‘it’s all good’ (as my close woman friend is fond of saying haha).

If your customer DOESN’T want to buy a lot at that price level, your strategy is to REDUCE the price level and make up for it by doing a higher VOLUME of sales.

Profit can be made at lower prices OR higher prices. It depends on the VOLUME of sales. An example is McDonald’s Dollar menu. High volume, low cost to customer – and McD’s still makes a tidy profit :-)
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One more quote from Jennifer – ‘There it is’ :-)

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