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marklynette23's avatar

What is the diffrence between cost percentage and real dollar value?

Asked by marklynette23 (1points) July 16th, 2009

purchasing and cost control

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1 Answer

geeky_mama's avatar

Cost percentage equals total variable costs divided by total sales.
That is, how much it costs to obtain what I’m selling, sell what I’m selling and then divide that across my net sales.

So, if sell bottled water and have 10 bottles in stock that I’ve purchased from my supplier for $10 and my policy is to allow my employees to drink our product for free, I might actually running at a 100% cost percentage if I only sell 3 bottles at $2 and my employees drink the other 7 bottles because it’s a hot day. (Actually, then I have a loss.. )

Real dollar value ..I don’t think of this in retail terms exactly – -which is how I was thinking of regarding cost percentage. Real dollar value is figuring out the relative value of an item over time given economic fluctuations. A good article about this is at:
http://www.measuringworth.com/uscompare/

Real dollar value is like comparing what your grandfather paid for his Sear’s Craftsman house in 1924 versus a house that is for sale currently in today’s dollars. (I think).

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