Real-Life Math
You have a new line of snowboards coming out in the fall. You have
designed them so that they are the best quality for the least expensive price.
You want this snowboard to be affordable to everyone, but you still need to
make a profit.
The board cost you $200 to design and manufacture. Now
you need to figure out the other costs, such as taxes, shipping and handling,
and markup. You are hoping to make a 15 percent profit from the product. Plus,
you want it all to be less than $300 after all the costs are calculated.
"When
thinking about getting into this business, I took many of these things for
granted," says snowboard designer Scott Flint.
"When trying to price
a product, many people will use a percentage markup. For example, if I were
to pay a manufacturer $200 for a board and then try to sell that board, I
would take a percentage of the board's cost and try to make some money.
Simple enough, but unexpected costs such as shipping and handling
can really start to add up."
Here are your costs:
$200
for the snowboard
15 percent tax
$5.95 shipping and handling to the
customer
If you charge the customer $300, will you
make at least a 15 percent profit?