How to calculate Maximum Retail Price (MRP), price to retailer (PTR) and price to stockist (PTS)?

 

 

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In This Article, we will cover topic-

• PTR/PTS calculator
• How to calculate MRP (Maximum Retail Price)?
• How to calculate PTS (Price to Stockist)?
• How to calculate PTR (Price to Retailer)?
• Factors affecting Maximum Retail Price
• Formulas
• Excel Sheet Calculator for MRP calculation, PTS calculation and PTR calculation
• Download MRP/PTS/PTR Calculator
• Specific Examples to understand MRP/PTS/PTR calculation

PTR/PTS Calculator:

Maximum Retail Price(MRP):

Maximum retail price may be defined as the final maximum cost paid by an end consumer for any goods/services.  A good and/or service may be sell out less than from its MRP but can’t be sell out more than its MRP. MRP is inclusive of all taxes and no further taxes could be added in this unless specified.

Its compulsory to print maximum retail price at any good/service. Maximum Retail Price (MRP) is calculated by actual manufacturing cost , profit margin, marketing expenses, C&F margin/franchisee margin, Stockist Margin, Retailer Margin, GST etc. Actual manufacturing cost may include manufacturing cost, transportation, electricity, GST, salary, rent, office handling charges etc.

Maximum Retail Price calculation is almost same of all sectors and industry. Few minor changes may be vary according to industry and distribution channel.  (Like In case of pharma franchise marketing, C&F and pcd/Franchisee may be same and/or different.  )

Maximum Retail Price Calculation Formula= Manufacturing Cost + Packaging/presentation Cost + Profit Margin + CnF margin + Stockist Margin + Retailer Margin + GST + Transportation + Marketing/advertisement expenses + other expenses etc.

Click here to Download MRP (Maximum Retail Price) Calculator in Microsoft Excel Format

Below calculation is for example purpose only. Change value of yellow color portion as per your need. Change value and wait for seconds to get your mrp online. Remove what is not applicable.

For Example a company is producing a product a product/service at cost of 35/- per piece. Then MRP can be fixed according according to above formula.

• Manufacturing cost=35/-
• Packaging/Presentation Cost= 5/-
• Margin 25%= 35*25/100=8.75/-
• Total Cost=35+5+8.75=48.75/-
• GST: 4.76/-
• CnF margin 6%= 4.08/-
• Stockiest margin 10%=7.21/-
• Retailer Margin 20%= 15.88/-
• Transportation Cost: 1.30/-
• Marketing/Advertisement Expenses: 14.50/-
• Other Expenses: 3/-

Maximum retail price = 35 (MC) + 5 (PC) + 8.75 (M) + 4.08 (CFM) +7.21 (SM) + 15.88 (RM) + 4.76 (GST) + 1.30 (T) + 14.50/- (M) + 3/-(O) = 99.48, in round figure is 100/-.

Factors that influence the calculation of the Maximum Retail Price (MRP)

Several factors can influence the calculation of the Maximum Retail Price (MRP) in the pharmaceutical industry. These factors can include:

1. Manufacturing Costs: The cost of manufacturing a pharmaceutical product can have a significant impact on the MRP. These costs include the cost of raw materials, production, packaging, and labeling. The higher the manufacturing cost, the higher the MRP.
2. Research and Development Costs: Research and development costs can also affect the MRP. Developing a new drug or product involves extensive research, testing, and approval from regulatory authorities. These costs are factored into the MRP to ensure that the pharmaceutical company recovers its investment.
3. Taxes: Taxes such as excise duty, customs duty, and sales tax can increase the MRP. The tax rate varies from state to state and country to country.
4. Marketing and Distribution Costs: The cost of marketing and distribution can also influence the MRP. Pharmaceutical companies invest in marketing campaigns and sales promotions to increase brand awareness and boost sales. The costs associated with these activities are factored into the MRP.
5. Profit Margin: A profit margin is added to the total cost of manufacturing, research and development, taxes, and marketing and distribution costs to arrive at the MRP. The profit margin ensures that the pharmaceutical company earns a profit on the sale of the product.
6. Competitors MRP: It is important to conduct market research and analysis to identify the MRP of similar products offered by their competitors. This information is then used to ensure that the MRP of their products is competitive in the market.

In summary, the calculation of MRP in the pharmaceutical industry or any other industry is a complex process that involves considering several factors. Accurate pricing strategies are crucial for the success of a pharmaceutical franchise business or any business , and franchisees should ensure that their pricing strategies comply with legal and regulatory requirements while remaining competitive.

Price To Stockist (PTS)/Price To Retailer (PTR) Calculation:

Here we will calculate price to stockiest (PTS) and Price to Retailers (PTR) with any given MRP and margin percentage.
For Margin percentage in pharmaceutical sector check: profit margin in pharmaceutical industry (Manufacturer to retailers)

Things Required:

Maximum Retail Price
GST value (5%, 12%, 18%, 28%)
Retailer Margin
Stockist Margin

Suppose
MRP = 120/-
GST value = 12%
Retailer Margin = 20%
Stockist Margin = 10%

First you need to deduct retailer margin from MRP. This will give a net value that in other words we can say PTR including GST like below:
Formula used will be MRP*(1-Retailer Margin %)
Net value = 120*(1-20%) = 96/-

PTR Calculation:

Now calculate Price to retailer. Price to retailer (PTR) will be calculated by dividing above net value from GST factor value. For that you need to first calculate GST factor value. Formula for GST factor calculation is finding below:
GST Factor = (100+GST)/100
GST Factor value = (100+12)/100 = 112/100 = 1.12
PTR calculation formula = Net Value / GST Factor = 96/1.12 = 85.71/-

PTS Calculation:

Price to stockist will be calculated by deducting stockist margin percentage from retailer price. Formula for calculating price to stockist (PTS) is like:
PTS calculation formula: PTR*(1 – Stockist Margin %) = 85.71*(1-10%) = 77.14/-

Other Calculations:

If you want to calculate other calculations like Cnf price, sub stockist price etc then you can use formula like describe above. Suppose CnF margin is 6% then it will be calculate by below formula:
CnF (Carrying & Forwarding Agent Price) = PTS*(1 – CnF margin %) = 77.14*(1-6%) = 72.51/-

Read Related: What is Goods and Service Tax?
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Medicine wholesale business profit margin

Question and Answer Related to MRP, PTR and PTS

Question: PTR meaning in pharmacy?
Answer: Price to retailers i.e. at which rates pharmaceutical company or distributor or stockiest sell goods to the pharmacy store.

Question: MRP stands for
Answer: Mrp is stand for maximum retail price that is to be paid by actual consumer for any product or services.

Question: Who decides MRP in India?
Answer: MRP is decided by the owner of that brand i.e. Company, firm or enterprises or individual. In some regulated sectors like pharmaceutical, some products fall under price control as per DPCO. Products that come under price control, maximum mrp limit is fixed by regulated authority. But for other products, no mrp restriction and one can fix mrp as per their need or market need.

Question: How to calculate gst on mrp?
Answer: GST is generally included in MRP. You can’t further add gst on mrp. You can less gst from mrp and calculate mrp without gst by formula i.e. MRP w/o gst = MRP*(1-GST%)

Question: What is difference between mrp and selling price?
Answer: MRP is maximum amount for that product or services but selling price is the price where a business consider that it’s profitable for them to sell at that price. For example if a product has 95 rs mrp then you can’t sell it above this price but if distributor sell it to retailer at retailer price i.e. 67.86/- or any net rate i.e. 45 rs or any other value then it will be its selling price.

Question: What is mrp formula for inclusive of vat?
Answer: Vat (Value added Tax) was tax structure before gst implementation in India. If you want to calculate mrp inclusive of vat then you can replace gst with vat and calculate your mrp from above calculations.

Question: Which is correct formula for calculation of retail price of formulation from above two method?
Answer: Both can be used but first method is more acceptable and used by most of business.

Question: How to do reverse calculation of gst?
Answer: If you have purchased a good at 100/- from unregistered person and gst of that product is 5%. Then your reverse calculation will be 100*5% = 5/-. Now you have to pay that amount at gst portal in supply extract to reverse charge column after that you can claim input of that gst paid by you at input tax (reverse charge) column at gst portal.

Question: Can anyone sell a product more than its mrp?
Answer: No one can sell a product more than its mrp. As per the Legal Metrology Act 2009, if the retailer sells a product at a price higher than the MRP, shall be liable to pay a fine or face imprisonment.

Hope you have found this article helpful.

If you have any another method for calculating ptr and pts, you can share with our readers through comment or mail. We will update our article with better way of calculating. Please revert with your suggestions and queries at pharmafranchiseehelp@gmail.com

Read Here: How to calculate profit margin, net rates, trade rates in Pharma franchise/pcd Marketing?