Real profit on an export order

In a real company

Export house owner, finance, senior merchandiser

The FOB looks good, but commission, bank charges, freight you pay and export incentives decide the real profit. This is how owners judge whether an order was worth it.

Key ideas

• Revenue = quantity × price × exchange rate.
• Cost = direct cost × (1 + overhead%) + commission + bank charges + any freight you pay.
• Export incentives (e.g. RoDTEP) add back to profit.

Formula

Revenue

= Qty × Price × Exchange rate

Profit

= Revenue + Incentives − Cost

Worked example

10,000 pcs at $6.40, $1 = ₹83.50. Fabric ₹305, CM ₹65, trims ₹18, other ₹30 per piece; overhead 8%, commission 5%, bank charges 0.25%, incentive 2%.

1. 1Revenue = 10,000 × 6.40 × 83.50 = ₹53,44,000
2. 2Direct = ₹41,80,000 + overhead ₹3,34,400
3. 3Commission ₹2,67,200 · bank ₹13,360 · incentive +₹1,06,880
4. 4Profit = ₹6,55,920 (12.27%)

✅ ₹6.56 lakh profit — 12.27% of revenue.

Common mistakes

• Ignoring bank and forex charges.
• Counting incentives before they are received.
• Using the booking-day exchange rate instead of the realisation rate.

Quick quiz

Answer 2 of 3 correctly to complete the lesson.

1. 1. 5,000 pcs × $5 at ₹80 = revenue?

   ₹20,00,000₹2,00,000₹25,000₹4,00,000

2. 2. Which increases export profit?

   Bank chargesCommissionExport incentiveOverhead

3. 3. Revenue ₹10 lakh, profit ₹1.2 lakh. Profit %?

   12%1.2%120%8.3%