Math/Work Question

**TheSaxRunner05** · 10-5-2017, 10:56 AM

I know this is just algebra, but I was struggling a bit to find the formula for this.

Using brute force methods, I've found that between pricing at 37% Gross Margin and 40.5% GM, you'd have to sell at least 16.2% more product at the lower GM to make more profit. What formula gets you to this number? When I try my hand at it, all I can come up with is that one price is 5.88% higher than the other.

If someone could help me derive the formula that outputs my brute force value of 16.2%, I'd be greatful.

Basically, how much more do you have to sell at Gross Profit % A than Gross Profit % B to make more Gross Profit Dollars? Where A<B.

For reference, Gross Margin is (Price - Cost)/Price

**Rapta** · 10-5-2017, 11:01 AM

brute force methods

**TheSaxRunner05** · 10-5-2017, 11:38 AM

Nvm I think I figured it out -
Where A is the lower GM and B is the higher one (written as decimals)
(1-A)/(1-B)/A/(1-B)
It's hard to do math notation on here

Arntonach · 10-5-2017, 01:05 PM

Something tells me you need to set up some slope formulas to compare your number of sales and profits to your gross margins.

**TheSaxRunner05** · 10-5-2017, 04:01 PM

I was just looking at ratios for this question. We can then look at the actual numbers to see how it played out.

The question was: how much more do we have to sell at a lower gross margin to make the same profit? As a ratio, it can be calculated without looking at a specific item.

10-5-2017, 10:56 AM	#1
TheSaxRunner05 The Doctor Join Date: Apr 2006 Age: 35 Posts: 6,145	Math/Work Question I know this is just algebra, but I was struggling a bit to find the formula for this. Using brute force methods, I've found that between pricing at 37% Gross Margin and 40.5% GM, you'd have to sell at least 16.2% more product at the lower GM to make more profit. What formula gets you to this number? When I try my hand at it, all I can come up with is that one price is 5.88% higher than the other. If someone could help me derive the formula that outputs my brute force value of 16.2%, I'd be greatful. Basically, how much more do you have to sell at Gross Profit % A than Gross Profit % B to make more Gross Profit Dollars? Where A<B. For reference, Gross Margin is (Price - Cost)/Price __________________

10-5-2017, 11:38 AM	#3
TheSaxRunner05 The Doctor Join Date: Apr 2006 Age: 35 Posts: 6,145	Re: Math/Work Question Nvm I think I figured it out - Where A is the lower GM and B is the higher one (written as decimals) (1-A)/(1-B)/A/(1-B) It's hard to do math notation on here __________________

10-5-2017, 01:05 PM	#4
Arntonach Owlbears Rock! Join Date: Mar 2012 Location: The coldest place in hell Age: 33 Posts: 2,492	Re: Math/Work Question Something tells me you need to set up some slope formulas to compare your number of sales and profits to your gross margins. __________________ pack of hard stuffs pack of my stuffs

10-5-2017, 04:01 PM	#5
TheSaxRunner05 The Doctor Join Date: Apr 2006 Age: 35 Posts: 6,145	Re: Math/Work Question I was just looking at ratios for this question. We can then look at the actual numbers to see how it played out. The question was: how much more do we have to sell at a lower gross margin to make the same profit? As a ratio, it can be calculated without looking at a specific item. __________________

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