Calculating the Wholesale Cost and Retail Price Estimate

Calculating the Wholesale Cost and Retail Price Estimate for Floral Design Knowing the cost and charging the proper price ensures adequate profit for the business.

Background n Discuss and Define the following terms n n n n n Supplies Products Added-Value Consumer / Customer Wholesale Retail Mark-Up Profit Costs of Production Marketing / Advertising

Price Sheet n Using this price sheet will allow us to calculate the wholesale price that we paid to create the floral design. n n n Then we can add the mark-up value to charge the appropriate retail price to the customer, to ensure company profit. To get started we need to gather our invoices that show what we paid for the items we included in the finished product. We will also need our RECIPE that shows how much of each product that we used in the design.

Wholesale Cost n n In order to know the correct retail price, we must first determine what the input costs were to create the finished product for sale. What were the supply costs? n n Flowers, foliage, filler, vase, accessories What about labor costs? Delivery costs? n n Think of this in a real world setting Employees want to be paid! Cost of vehicle, gas, insurance The business costs: rent, electricity, etc.

Retail Price n n Why do we mark-up the price of the floral materials and hard goods / supplies? You have “Added-Value” to an agriculture product! n n n The value you added: skills in artistic design, making a finished product that is marketable and desirable to the consumer (your customer) You took the ingredients and made them worth MORE! Would you rather buy flour, sugar, and eggs or a cake? A business must make profit to pay the employees and provide an income to the owner. n An owner needs to have a home, a car, food, clothing, vacation activities, etc.

How much do we mark up fresh product? n Description of Flowers & Foliage Fresh products are marked up triple because there is more loss – some items are damaged upon arrival, don’t look just right, color can be wrong, stems can break, leftovers can’t be sold, etc. # Stems Used Price of Bunch Stems per Bunch Price per Stem Total Wholesale Cost of Stems Retail Price (after mark-up) 3 x price Carnations 5 15. 00 25 . 60 3. 00 9. 00 Leather Leaf Fern 2 3. 00 20

Wholesale Cost Description of Flowers & Foliage # Stems Used Stems per Bunch Price of Bunch Price per Stem Retail Price (after mark-up) 3 x price Total Wholesale Cost of Stems Flower Subtotal: __________ Fresh Goods – flowers, foliage, filler, natural elements that can spoil fruit or vegetables for theme, plants, etc. These are items that have a short shelf life.

How much do we mark up hard goods? n n We mark up hard goods double. We still up-charge these items because we had to order them in bulk (large upfront cost) and we paid a delivery fee. These are only marked up double (compared to triple for fresh) because if there are extra items, they can be used another time. Some items are losses, if they are broken, or if they are for a holiday or theme that is no longer needed. Description of Hard Goods & Supplies Quantity Used Cost Per Case Items Per Case Cost per Item Total Wholesale Cost of Items Retail Price (after mark-up) 2 x price Bud vase 1 18. 00 24 . 75 1. 50 Ribbon 1 yd. 5. 00 50 yd.

Wholesale Cost – Hard Goods Total Wholesale Cost of Items Retail Price (after mark-up) 2 x price Description of Hard Goods & Supplies Quantity Used Items Per Case Cost Per Case Supply Cost per Item Subtotal: __________ Hard Goods – containers/vases, supplies, ribbon, foam, wood picks, preservative, candles, accessories, enclosure cards, wire, cardette, etc.

Other indirect costs… n n n Once you have calculated your subtotals (fresh product total and hard good total) then add those together to get your SUBTOTAL for the finished design. Now – we add the other costs associated with the production process. Taxes: charge state sales tax n n Labor is calculated to cover the cost of paying an employee minimum wage. In floral there are various options for this. One method calculate labor at $1 per minute for making the design. This is most effective with experienced designers, rather than new workers.

Now find the total prices! Total Wholesale Costs Total Retail Price _____ Tax 7. 25% (Multiply Retail by. 0725) +_____ Labor Charge 25% (Multiply Retail by. 25) Delivery Charge 10% (Multiply Retail by. 10) Profit (retail – wholesale) Grand Total: (Sum of Retail, Labor, Tax, and Delivery) +_________ $_____

You have now learned a skill! n n Calculating wholesale and retail costs is a skill! Learning the necessary processes of running a business is important for any job you have! You should include this skill on your resume! Include a work sample that demonstrates this business skill in your portfolio n Include a picture of a finished design, list the itemized wholesale cost, and create an invoice with the retail price

How can this apply to other agricultural businesses? n n n What are some costs for meat production? n Animal, feed, vet costs, kill fee, butchering, cut/wrap, housing, insurance, ? ? ? How do we determine an appropriate price for the finished price? What about a loaf of bread? What about cheese? What about plants from the greenhouse? What about service products: your labor for landscaping, web design, journal / blog for a company? ?

Summary n n Our class doesn’t charge accurate retail prices because we do not have accurate input costs. As a public school, many of our costs are paid for through state or federal funding. n n We do not have to pay our electricity, rent, insurance, etc. out of our class budget. We have free labor! YOU! We are not true professionals – we have not invested years or tuition for adequate advanced training We are not trying to be a profitable business n We want to support our local businesses providing this service, not compete with them.