Course contents
Advanced · Course 5: Pricing and Profitability · Lesson 4 of 4

Building a complete pricing and profitability worksheet

Level: AdvancedTime: 50 minutesOrder used: A (the T-shirt, reused as Cedar & Co.'s own domestic hybrid style)Tool: Pricing and profitability worksheet
For a retail buyer or factory-side merchandiser who has completed the first three lessons of this course and now needs to bring the margin-target price, the price-volume comparison, and the branded-style comparison into one complete check for a single style. Lessons 5.1 through 5.3 are useful preparation, though not required. Figures are teaching figures.
RetailerCedar & Co. (12 shops, domestic)
FactoryDelta Garments
ProductCedar & Co.'s own style, equivalent in value to Order A
Construction180 GSM single jersey, Ne 30/1 combed cotton, Order A's own construction
Quantity15,000 pieces, forecast plus reorder
Business modelHybrid: forecast quantity committed, reorder quantity added once early sales confirm demand
02Opening

This page teaches a retail buyer or factory-side merchandiser how to bring every pricing check from this course into one complete worksheet for a single style

This page teaches how to combine a margin-target price, a price-volume comparison, and a branded-style comparison into one complete pricing and profitability check, for a retail buyer, a factory-side merchandiser at Delta Garments who needs to understand how its own cost feeds every later pricing decision, or a brand-side contact managing both roles. The first three lessons of this course each taught one separate check; a real pricing decision on a real style needs all three checked together, on one page, before a price is finally approved.

A buyer who runs each of the three checks in this course as separate, disconnected exercises, once each, in three different files, can approve a price that passes one check while quietly failing another, since nothing forces the three results to be seen side by side. Without a single combined worksheet, a style can clear its margin target, look fine on a price-volume comparison run in isolation, and still be priced wrong against the comparable branded style beside it, because no one step in the process ever compared all three outcomes together.

03Before you start

You need: the pricing formula from Lesson 5.1, the total-profit comparison from Lesson 5.2, and the branded-style price-gap check from Lesson 5.3. Lessons 5.1 through 5.3 are useful preparation, though not required.

By the end of this lesson you can:

  • list the three checks a complete pricing and profitability worksheet combines: the margin-target price, the price-volume comparison, and the branded-style price gap;
  • build a single style's own complete pricing picture from Cedar & Co.'s own hybrid order;
  • identify which of the three checks a given pricing decision is missing, when only one or two have been run;
  • decide whether a style's own proposed price should be approved, revised, or checked further, using all three figures together.

Not covered here: each of the three checks on its own is covered in Lessons 1 through 3; this lesson only combines them.

04Key terms

Words you will meet in this lesson

TermMeaning
Complete pricing checkRunning the margin-target price, the price-volume comparison, and the branded-style price gap together for one style, rather than any one of the three alone.
Margin targetThe margin percentage a season's own plan requires a style to achieve, set before any single price is chosen.
Total profitProfit per piece multiplied by the number of pieces actually sold, the figure that decides which of two price plans earns the business more money.
Price gapThe difference in shop price between a private-label style and a comparable branded style sold alongside it.
Cost before profitEverything a company pays to make or buy a product, before its own profit is added.
05Teaching
The rule

A complete pricing decision runs the margin-target price, the price-volume comparison and the branded-style price gap together, not as three separate exercises

Each of the first three lessons in this course answers one question on its own: what price hits a margin target, which of two price-and-volume plans earns more total profit, and whether a price sits at a sensible gap from a comparable branded style. A complete pricing check runs all three for the same style, at the same time, because a price that passes one check can still fail another, and only checking all three together shows the full picture before a price is approved.

Three checks, run separatelyMargin target, checked alonePrice-volume, checked aloneBranded gap, checked aloneOne complete pricing checkMargin targetPrice-volumeBranded gap, together
Three checks run separately can each pass on their own and still miss a problem the other two would have caught. Running them together, on one style, at one time, is what a complete pricing decision actually needs.
What you meet in real life

How a complete pricing check is assembled differs by market, business model and who owns which part of the underlying cost

What can differThe shapes you meetWhy it matters
Domestic hybrid vs. export MTOA domestic hybrid retailer such as Cedar & Co. can revisit all three checks again at reorder, since cost and volume can both move; an export Made to Order retailer generally runs the complete check once, before commitment, with no reorder point to revisit itA hybrid retailer's complete check is a repeating habit; an MTO retailer's complete check is a one-time gate that has to be right before the order is placed
Factory-side visibility into the costA factory-side merchandiser at Delta Garments can confirm the cost figure that feeds every one of the three checks, but does not usually see the retailer's own margin target, volume forecast, or branded-style comparisonA factory-side contact who is asked to help build the worksheet should confirm the cost is correct, while leaving the three retail-side judgements to the retailer that owns them
A style with no comparable branded styleA genuinely new private-label style, with nothing similar sold in the same shop, cannot run the branded-style price-gap check as originally describedThe complete check still runs the margin-target and price-volume checks; the branded-gap check is skipped and noted as not applicable, rather than forced onto an unsuitable comparison
A style approved on two checks but never checked on the thirdA style clears its margin target and its price-volume comparison, but no one ever checks it against a comparable branded style before it goes on saleSkipping one of the three checks defeats the purpose of a complete worksheet; a style approved on two out of three checks is not the same as a style approved on all three
Product familiesThe same three-check structure applies whether the style being priced is apparel, socks and hosiery, knit-to-garment, terry and towels, or home textiles and beddingA retailer new to the complete check often starts with a single, familiar style, then extends the same three-check habit to other product families later
The case we follow

Mona at Delta Garments confirms the cost figure Cedar & Co. needs to complete all three pricing checks on its own hybrid style

Cedar & Co. is finalising the pricing for its own hybrid style, equivalent in value to Order A, made by Delta Garments: 12,000 pieces committed against forecast, with a 3,000-piece reorder option once early sales confirm demand. Mona, the merchandiser at Delta Garments, confirms the buying cost of USD 8.00 per piece Cedar & Co. is working from is correct and unchanged from the original quotation, since every one of the three pricing checks Cedar & Co. needs to run depends on that cost figure being right.

With the cost confirmed, Omar, the owner of Cedar & Co., runs all three checks together: the margin-target price against the season's own 60% target, the price-volume comparison between holding price and cutting it, and the branded-style price gap against a comparable branded T-shirt sold in the same shops.

The worked number

Cedar & Co.'s complete pricing check: a margin-target price of USD 20.00, a total-profit advantage for holding that price, and a USD 0.10 gap under the comparable branded style

Check 1, margin-target price: price = cost / (1 − margin target)
8.00 / (1 − 0.60) = 8.00 / 0.40 = USD 20.00
Cedar & Co. rounds to its own usual USD 19.90 shop price, close enough to the 60% target to keep
Check 2, price-volume comparison (from Lesson 5.2's own worked number):
Hold USD 19.90 on 12,000 pieces: total profit USD 142,800
Cut to USD 15.92 on 15,000 pieces: total profit USD 118,800
Holding price wins by USD 24,000
Check 3, branded-style price gap:
Comparable branded style shop price: USD 20.00
Cedar & Co.'s own style at USD 19.90: price gap = 20.00 − 19.90 = USD 0.10, priced lower

All three checks point the same way: the USD 19.90 price is close enough to the 60% margin target to keep without adjustment, it beats the alternative price-volume plan by USD 24,000, and it sits USD 0.10 below the comparable branded style, a small but real advantage. A style that failed even one of these three checks, for example if the branded style were priced at USD 19.80 instead, USD 0.10 below Cedar & Co.'s own price rather than above it, would need the price revisited even though the other two checks still passed.

Check 1: margin close to 60% targetPassCheck 2: total profit favours holding price by USD 24,000PassCheck 3: USD 0.10 below comparable branded stylePass
All three checks pass at the same USD 19.90 price, which is what a complete pricing decision needs to show before approval. Any one bar turning red would mean the price still needs work, even with the other two showing pass.
The method

Four steps to build a complete pricing and profitability check for a single style

  1. Confirm the cost figure every later check depends on, with the factory-side contact if the buying route makes that appropriate.
  2. Run the margin-target check, price = cost ÷ (1 − margin target), and compare the result against the price actually planned.
  3. Run the price-volume comparison, calculating total profit for at least two plans, before committing to either.
  4. Run the branded-style price-gap check, where a comparable branded style exists, and record all three results together on one worksheet before final approval.
The trap

A common mistake is treating a style as fully priced once it passes any one of the three checks, without running the other two

A common mistake is stopping the pricing decision as soon as one check passes, most often the margin-target check, since it is the simplest of the three, and assuming the price-volume comparison and the branded-style gap would also have passed without actually running them. A style that clears its margin target can still lose total profit against an untested alternative price-volume plan, or sit badly against a comparable branded style, and neither problem shows up unless that specific check is actually run. The whole purpose of a complete worksheet is that no one of the three checks stands in for the other two.

06In plain words

A single style's own price is not properly checked until three separate questions have all been asked and answered together: does the price hit the margin target, does it beat the realistic alternatives on total profit, and does it sit at a sensible gap from anything comparable a customer could choose instead. On Cedar & Co.'s own style, all three checks point the same way at USD 19.90: close enough to the 60% margin target, ahead by USD 24,000 in total profit against a lower alternative price, and USD 0.10 below the comparable branded style. Passing only one or two of these checks is not the same as completing the pricing decision.

07Quick check
  • A complete pricing check combines the margin-target price, the price-volume comparison, and the branded-style price gap.
  • Passing one check does not prove a price would also pass the other two; each has to actually be run.
  • A factory-side contact can confirm the cost figure that feeds every check, without owning the retail-side judgements built on top of it.
  • Where no comparable branded style exists, the branded-gap check is skipped and noted as not applicable, not forced onto an unsuitable comparison.
  • A hybrid, domestic style can revisit all three checks at reorder; an export MTO style usually runs them once, before commitment.
  • All three checks passing at the same price is what a complete pricing decision needs to show before final approval.
08Workplace scenario

Omar must decide whether to approve Cedar & Co.'s USD 19.90 price after only the margin-target check has been run

Cedar & Co.'s planning assistant reports that the USD 19.90 price passes the margin-target check, close to the season's own 60% target, and recommends approving the price on that basis so the style can be finalised before the buying deadline. The facts in front of Omar:

  • Check 1, the margin-target check, has been run and passed.
  • Check 2, the price-volume comparison, and Check 3, the branded-style price gap, have not yet been run for this specific style.
  • The buying deadline is close, creating pressure to approve the price now rather than run the remaining two checks.

The note from the planning assistant's own file:

Cedar & Co., internal pricing note. "USD 19.90 price confirmed against the 60% margin target. Recommend approval ahead of the buying deadline."

Should Omar approve the price now, on the strength of the margin-target check alone? Decide before you open the decision.

Show decision

No. Omar should not approve the price until the price-volume comparison and the branded-style price gap have also been run.

Two facts decide this. First, this lesson's own rule states that a complete pricing decision requires all three checks, and this lesson's own trap warns specifically against treating one passed check as proof the other two would also pass. Second, the worked number in this lesson shows all three checks can point different ways on a similar style; approving on Check 1 alone risks missing a Check 2 or Check 3 result that would have changed the decision, exactly the situation the trap describes.

A tight buying deadline is a real pressure, but it does not change what a complete pricing check actually requires; if time is genuinely too short to run all three, that constraint should be stated openly as the reason for a partial check, not disguised as a completed one.

09What it costs

Approving on one check alone risks the same USD 24,000 total-profit gap this course's own Lesson 5.2 already showed can exist

If Check 2 (price-volume) had not been run and Cedar & Co. had separately chosen the lower USD 15.92 price for unrelated reasons:
Total profit at USD 19.90 (12,000 pieces): USD 142,800
Total profit at USD 15.92 (15,000 pieces): USD 118,800
Gap left unchecked: USD 24,000

This is the same gap Lesson 5.2 already calculated in full; it is repeated here to show what skipping Check 2 specifically would have risked, on top of whatever Check 3 might separately have found. A complete worksheet exists precisely so that a gap like this is caught before a price is approved, not discovered afterward in a season's own results.

10Working template

Pricing and profitability worksheet: run all three checks for one style on a single page before final approval

Use the T20-C05 Pricing and profitability worksheet in full. Enter the style's own cost and margin target on the first sheet to confirm the margin-target price, enter at least two price-and-volume plans on the second sheet to compare total profit, and enter the comparable branded style's own price on the third sheet to calculate the price gap. The fourth sheet draws all three results together into one combined view, so a style's own pricing decision is visible as complete, or as still missing a check, on one page.

[Download the Pricing and profitability worksheet](../../templates/T20-C05-pricing-and-profitability-worksheet.xlsx)

Download the Pricing and profitability worksheet (Excel)

11Check yourself

1. What three checks does a complete pricing and profitability worksheet combine?

2. A style passes the margin-target check but has not yet had its price-volume comparison or branded-style gap checked. Is the pricing decision complete?

3. A factory-side merchandiser is asked to help a retailer build its complete pricing worksheet. What is the merchandiser's own appropriate role?

12Glossary
ENARFRTRMeaning
Complete pricing checkفحص التسعير الكاملVérification tarifaire complèteTam fiyatlandırma kontrolüRunning the margin-target price, the price-volume comparison, and the branded-style price gap together for one style, rather than any one of the three alone.
Margin targetهدف الهامشObjectif de margeMarj hedefiThe margin percentage a season's own plan requires a style to achieve, set before any single price is chosen.
Total profitإجمالي الربحProfit totalToplam kârProfit per piece multiplied by the number of pieces actually sold, the figure that decides which of two price plans earns the business more money.
Price gapفجوة السعرÉcart de prixFiyat farkıThe difference in shop price between a private-label style and a comparable branded style sold alongside it.
Cost before profitالتكلفة قبل الربحCoût avant profitKârdan önceki maliyetEverything a company pays to make or buy a product, before its own profit is added.
13Next

Course 6: to be confirmed

You now hold a complete pricing and profitability worksheet, from a margin-target price through a price-volume comparison to a branded-style check. The next course in this track builds on this same worksheet habit for a different retail planning decision. Back to the course map

14Ladder

RecognizeName the three checks a complete pricing decision combines.
ConnectSee how passing one check does not confirm the other two would also pass.
CompareTell a factory-side contact's role in confirming cost apart from a retailer's own pricing judgements.
DecideJudge whether a style's own price is fully checked, or still missing one of the three required checks.