Tip: Here is a worked example for the price structure of a bottle of perfume, as given to me by a student. The vocabulary (Net Net, Margin 1, Margin 2 etc) is exactly as he used it, and he said it was standard. Use it as a model to discuss the price structure of your students’ own products.
Background
Here is the price structure of a bottle of perfume. The figure of 100 for the retail price is nominal.
Retail Price 100
Sales tax 16
—-
Net Retail 84
Retailer Profit 34
—-
Wholesale Price 50
Returns 1
—-
Net Sale Price 49
Promotional discounts
in local market 10
—-
Net Net 39
Distributor Profit 15
—-
Margin 1 24
Marketing 15
(local and international)
—-
Margin 2 9
(final profit for producer)