How can I estimate another company's selling price from their material cost?

Question

I am trying to find out the selling price of another company. This company frabricate metal parts and I know their material cost.
What other information do I need to calculate how much they are selling their parts?
What formula should I use?

John
www.anodizingracksonline.com

Answer 1

Call the other company and ASK them for their selling price!!

You are trying to make this FAR too complicated!!! Like another answer said.. Pretend to be a buyer.

You have the magic number already..you know what their costs are!!! Once you get the selling price by calling, or getting a friend to call the company..you know what their Gross profit margins are. !!


For a more complicated answer, lets say they were a public company and you could see their income statement and
gross profit margins...

Ok so they state that their cost is $10 per unit, and the Gross profit per unit is 25%..what is the selling cost??

10/(1-.25)= 13.33

Therefore:

Sales= 13.33
Cost= 10.00

Gross profit= 3.33


Note that there are two ways of looking at this...

In terms of gross profit MARGIN its 3.33/13.33=25%

But when you look at the price to cost, its a markup of
3.33 per 10 unit, or 33%

Answer 2

for most industrial companies in the U.S. the magic profit margin is around 25-30 percent.

Take Cost and divide it by (1 - %) [ex. Cost/(1-.25)]

This will give you a good approximation.

Answer 3

Why don't you pretend to be a buyer, to contact them on the pieces they are selling, then you can get a general idea on what is their margin cost.

Answer 4

you would need to know standard cost - which includes material, labor and routing (intermediate steps), plus overhead and their typical markup for covering Admin costs and profit