How to Calculate Wholesale Price

How to Calculate Wholesale Price
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Retailers and manufacturers often purchase inventory and equipment from wholesalers, which are common middlemen between manufacturers and retailers. Business owners are not explicitly required under Generally Accepted Accounting Procedures to calculate wholesale prices for financial reporting purposes. However, as an investor or competitor, you may want to obtain wholesale price information for various reasons. This can be done using market data, information contained within the subject company's financial statements or estimates made using benchmark financial information.

Use Financial Accounting Disclosures

A business owner can obtain wholesale price information via correspondence with a wholesaler or by examining invoices. Financial statements and tax returns often contain detailed information for inventory, breaking it down into raw material, work-in-progress and finished goods. Inventory purchase amounts are also sometimes disclosed.

Accounting methods can vary across industries. Therefore, the more information disclosed within the notes to financial statements, the more accurate your calculation. Use purchases or raw material as a gauge for wholesale prices and check to see if any discounts were applied to the purchases. It may also be necessary to factor in write-downs of inventory, if possible.

Use Industry or Market Data

Financial data companies provide industry benchmark statistics that can be used as a basis for estimating wholesale costs. For example, income statement information, such as "cost of goods sold" is provided as a percent of sales. This can be applied to the subject company's sales to estimate the subject company's cost of goods sold.

One important benefit of this method is that financial metrics are categorized by industry, reducing variances based on industry-specific accounting methods. An important disadvantage is that cost of goods sold is not broken down into sub-categories, and companies often include other costs such as labor and transportation costs within their costs of goods sold. If the relevant good is an easily priced commodity, like corn or oil, historical spot prices can be easily referenced by checking historical pricing information.

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