Help me, to help you?

Graham, welcome to GC

There are a number of possible problems with your calculations.

The cost of packing is, obviously, a pure guess on your part and would almost certainly be more.
They don't just have to add the packaging material but also the labour cost.
Is your postage charge based on an actual package you received?
Don't forget that there is a VAT charged in the P&P charge. Although you go to the post office and buy stamps that are free of VAT the mail order company has to charge you VAT on the whole amount as they are providing a service.

With a lot of mail order companies the charge for the item is, quite often, very little more than the cost to the company and they need to rely on the 'standard' P&P charge for their profit margin.

 

They offer the flat rate as some orders will be cheaper to post and some more expensive than the rate specified. By having one slightly inflated rate they maintain a happy average for p&p costs.
I know this having started an online deli!
Costs shift according to size and weight and the calculations start to give you a headache quite quickly if you don't just stick to one price.

 

Loofah, It's good to hear you've got it up and running . I had a small mail order business for many years and know all the problems you can have.

We had a contract with the P.O. It made things a lot easier for us. We packaged everything and stamped the packages with a rubber stamp that had our contract number on it. We then took the total weight and divided it by the number of packages and put the calculation slip in the mailbag. The P.O. then charged us an average price.

I don't know whether that would work now as there is quite a large difference in the rates. It worked very well for us and I did do a number of sample calculations to see whether it was costing us more. It always came out slightly cheaper because they gave us a 10% discount on the rates to the public. I suppose the discount allowed for any discrepancies.