Gross Profit Mark Up & Margin

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hello it is me again, need some help....
Iam unsure how to calculate "mark up" and "margin"
Example:
"Product brought by retailer at a cost of £100 the retailer sells it for £125"

Cost price + gross profit = selling price
£ 100 + £ 25 = £125

if any one could show me mathematically step by step how to calculate the "mark up" and the "margin" it wold be appreciated !!!!
Janine :?


Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Gross Profit Mark Up & Margin

    lets suppose the mark up is 25%, which in fractions is 1/4. Therefore formula to convert mark up to margin would be
    Y/(x+1).

    Let Y = top of the fraction. Let X = bottom of fraction.

    Therefore margin would be 1/(4+1)= 1/5.

    same applies to markup but the formula this time is
    Y/(x-1)

    Lets say the margin is 25%, which is 1/4 therefore markup would be 1/(4-1)=1/3
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Gross Profit Mark Up & Margin

    Sorry, I made a slight error in the formula for markup and margin it should be
    y/(x+y) from markup to Margin.

    Margin to Mark up it should be y/(x-y)

    example margin 30% markup would be 30/(100-30)
    therefore Markup would be 3/7=43%

    example Margin is 20% markup would be 20/(100-20)
    therefore Markup would be 20/80=25%

    example markup 50% margin would be 50/(100+50)
    therefore Margin would be 1/3= 33/1/3%

    example Markup 25% margin would be 25/(100+25)
    therefore Margin would be 25/125=20%

    Markup is based on gross profit/ Cost of sales* 100

    Margin is based on gross profit/ Sales * 100

    example mark up 25% Sales £150

    Convert markup to margin because we have the sales figure and margin is based on sales.

    Therefore margin would be 25/(100+25)=20%

    therefore profit = 20% of £150=£30

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Gross Profit Mark Up & Margin

    thanks roy !!!!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Gross Profit Mark Up & Margin

    Hi Guys!
    I would put it even in a simple format, the best point to start is to put the cost structure; if it is cost of sales that is 100% then this is known a mark up.

    sale 125% ?
    cos 100% £100
    Gross profit 25%

    then just the simple math. is £100/100%*125%= £25 sale

    if it is sales that is 100% then this is known as a margain

    profit on sale or margain ;
    sale 100%
    cos 75%
    G P 25%

    depends on what is being asked to find , it is quite easy to find the missing figures by constacting the COS. cheers

Categories

Privacy Policy