As already seen in calculating gross profit in 4.1, it is necessary to calculate the cost price of an item before the gross profit can be calculated.

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**Net purchase price**

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| The *Net purchase price* consists of the supplier’s price less discount received (net invoice price), and any adjustments with regard to possible purchase returns form part of the cost price of an item. |

**Supplementary cost**

This consists of costs such as courier, railage or transport costs from the supplier to the business’s premises. As well as clearance costs and import duties or similar costs that form part of the cost price of an item.

**Cost price per item**

The unit cost price is calculated by adding the net purchase price to the supplementary cost.

| The *cost price* is also known as the *landed cost* of a product, which includes the net purchase price plus any adjustments such as supplementary cost, which are directly related to the cost price. |