Typically when Job Costing, the Sell Price is not know until all of the cost are summed and a profit margin target is determined. Therefore, since the initial sell price is not known the formula used to derive the profit margin is:

 

Sell Price = Sum of known Cost / (1.000 - [Target Profit Margin %]

Profit = Sell Price - Cost

 

Example:

Cost = 100.00

Target Margin = 25% or .2500

 

Sell Price ($133.33) = Cost ($100.00 / (1.0000 - .2500 = .7500))

Gross Profit = $33.33 (Sell Price - Cost)

 

 

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