Wholesale Pricing Overview
The simplest formula to calculate the wholesale price is:
Wholesale Price = Total Cost Price + Profit Margin.
Total Cost Price includes variable costs of the product and overhead expenses divided by number of units. Use wholesale sales to build a profitable business. Take into account product costs when deciding pricing to establish a strong profit margin.
Wholesale Pricing Strategies
There are several ways to calculate wholesale price: absorption pricing, differentiated pricing, competitor-oriented pricing, and demand-based pricing.
Absorption Pricing Strategy
Absorption pricing involves math but provides the best price to earn a profit margin on each item sold. It includes both variable and fixed costs as a proportion. Absorption pricing is a long term price needed to cover all related expenses. The formula is: Variable cost per unit + ((Total overhead costs + administrative expenses) รท Number of items produced).