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BTW ... it seems to me this question is related to the latest increases in Egypt. ... right ??
I think you should differentiate between the "cost" of your products and the "price" at which you sell these products,
It would sound logical to increase the "price" of your product by the actual increase in the cost due to rising cost of raw materials and fuel. But sometimes, you may go higher than that in your product price and sometimes lower and absorb some of the additional cost to remain competitive in the market.
So ... let us focus on calculating the increase in product cost ... and leave it to you to determine if you want to increase the price and how much !!
To be fair and exact as much as possible in calculating the increase in your product cost because of the increases in raw materials and fuel, you need to see how much is the percentage of the cost of raw materials and fuel prices to the total cost of the final product.
You can calculate the delta cost increase in these two things (raw materials & fuel proces) and how much (as a percentage) this would add to the total cost of the product.
Let us say that the original percentages of raw material as24% and fuel price as6% of the total price of the final product. Then let us assume that the fuel price increase was100% and for the raw materials as50%
This means the fuel price component will now be48% and the fuel part will be9%
In pure numbers , suppose your product cost is100 $, out of which raw materials cost24 $ and fuel cost6 $ ... then the new cost would be48 $ for raw materials, and the fuel would be9 $ ... Yhis means your product now costs100 +24 +3 =127 $ Take these numbers back to the planning board and see what you want to do regarding the new price you would like to sell your product at !!
This can be calculated as follows:
Manpower cost = x%
Raw material cost =y%
Fuel cost =z%
profit = p
Then the increased cost will be = previous cost x (1. (1.x x Mc+1.y x Rmc+1.z x Fc) / (Mc+Rmc+Fc) )
AGREED WITH MR.THIAB
i would a gree with answer posted by mr. diab
It would be a complicated calculation.. See how much do we use the fuel in the products (products are affected differently); in the production process and the transference fees.
Both raw materials and fuel need to be always up to date to the latest prices; depending on the price difference you can calculate and for each product. I guess there would be a fast method to calculate it; so you would only have to add the new price.
Agree with Mr.Thiab. If there is any inflationary trend then that also need to be factored in for arriving at the final price increase.
am ageeing with Mr. Ashraful
Ido agree with the answer,s given by Mr: Mohammed thiab
