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  • How to work out gross profit margin & gross profit mark up figures?

    Hi Folks

    I am on level 3 at the moment & having difficulty working out gross profit mark up & margin figures. I basically know the formulas but very often there are other bits of information that you need to work out before working out the margin or mark up figures.

    Could someone be kind enough to explain to me how these figures are worked out if only a limited amount of information is given.

    Thanks in advance for your response.

  • #2
    Profiit = Selling Price -Cost Price
    Markup = (Profit / cost price) x 100
    Profit Margin = (Profit / selling price) x 100

    So if we are told that Margin is 20% and cost price is 40 and Profit is 10 we can work out what the selling price is by using mathematical equations, when we move a figure to the otherside we do the opposite calculation so a mulitply becomes a divide a minus become a plus etc
    Profit = selling Price - Cost price
    so 10 = S-40
    So moving the -40 to the other side we get
    10+40 = S
    So selling price is 50

    To do the calculation to be sure
    we have
    Profit Margin = (Profit / selling price) x 100
    So
    (10/50)*100 = 20%
    We can also work out the Markup as we have the right figures
    Markup = (Profit / cost price) x 100
    (10/40)*100 = 25%
    Girl Pirate
    You're forgetting one very important thing mate...

    Accounts is fun and interesting.....

    Comment


    • #3
      Hi Pirate

      Many thanks for your reply. However, some of the questions I am doing require finding values for cost of sales goods and gross profit.

      Can you be kind enough to give me an example including these?

      Thanks in advance.

      Comment


      • #4
        hi Geek84
        you did only mention margin and markup
        Could you give me an example of what it is you would be provided with in order to find Cost of Sales and Gross Profit, then I can use it as an example to show you
        thanks
        K
        Girl Pirate
        You're forgetting one very important thing mate...

        Accounts is fun and interesting.....

        Comment


        • #5
          Margin 30%

          Cost 70
          Profit 30
          Total 100

          (margin relates to % of profit on "Total" selling price)


          and


          Mark up 30%

          Cost 100
          Profit 30
          Total 130

          (mark up relates to % profit on cost)


          If you can get your head around the relationship between the amounts above, you can answer all questions that relate to margin and mark up
          Last edited by PGM; 12-06-11, 16:09.

          Comment


          • #6
            Have you had any luck figuring this out?

            Comment


            • #7
              Yes Thanks.

              I've done it now.

              Comment

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