# Overheads BONUS Insight

### Calculating your overhead % per product

Now you understand how to calculate your selling price, and you have

an initial view, you can further refine your overheads cost.

Why do I need to do that, I hear you ask?

Let me show you.

*Example:*

I have 3 products in my range.

The cost of making each one is below (product + time):

**£75 Cushion**

Total Cost = **£47.25**

Profit: £27.75,** 37%**

**£94 Cushion**

Total Cost = **£59.25**

Profit: £34.75,** 37%**

**£112 Cushion**

Total Cost = **£70.56**

Profit: £41.44,** 37%**

Notice that all of my profit margins are the same (37%).

Based on my overhead calculation above, I need to add a **£15.97** cost to each product.

So my total cost and profit for each cushion would then be:

**£75 Cushion**

Total Cost = **£63.22**

Profit: £11.78,** 16%**

**£94 Cushion**

Total Cost = **£75.22**

Profit: £17.73,** 19%**

**£112 Cushion**

Total Cost = **£86.53**

Profit: £25.47,** 23%**

I aimed to get to a 20% profit margin, so the £94 cushion is the closest, but I'm getting **less**

profit on the cheaper cushion, and **more** on the higher priced one.

To keep the profit margins fairly weighted, I should use a **% overhead cost**.

Firstly, calculate your Average Selling Price (ASP) by adding all of your

different prices together and dividing by the number of products:

£75 + £94 + £112 = £281 / 3

= **£93.67 ASP***

**A more accurate way of calculating ASP is to work out the mix of products you will sell.For example 15 x £75, £10 x £94, 5 x £112 = a total income of £2625.Divided by the number of cushions sold: £2625 / 30 = £87.50 ASP. It is lower because you are selling more of the £75 cushions.*

*You can use this method if you have a view on your sales by product and price point.*

Now take the **O****verhead cost per product **and divide that by the **ASP**:

(£15.97 / £93.67) * 100

= **17.0% Overhead Cost**

This is the percentage which we will apply to the Selling Price

(SP x Overhead Cost %), to get our new **O****verhead Cost per product**.

**£75 Cushion**

Total Cost = £47.25 **+** **£12.75**

Profit: £15.00,** 20%**

**£94 Cushion**

Total Cost = £59.25 **+**** £15.98**

Profit: £18.77,** 20%**

**£112 Cushion**

Total Cost = £70.56 **+**** £19.04**

Profit: £22.40,** 20%**

Ta-da!

All of my margins are now exactly the same, and the overhead cost has been

fairly weighted across all of my products, regardless of the selling price.

*You can use your FREE Overheads calculator to work this all through,included in your Flourish Pricing Calculator.*