FRA Mark up
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haychie
Registered Posts: 23 New contributor 🐸
What on earth am i doing?
I kind of understand the mark up so for example
sales price = cost+40% mark up on cost
= 900x 140% = £1260
But what about the next question:
What would the selling price be, excluding VAT, if the sales margin was 40%?
I really don't understand how they work it out and why? any help please? Exam Wednesday. :001_unsure:
I kind of understand the mark up so for example
sales price = cost+40% mark up on cost
= 900x 140% = £1260
But what about the next question:
What would the selling price be, excluding VAT, if the sales margin was 40%?
I really don't understand how they work it out and why? any help please? Exam Wednesday. :001_unsure:
0
Comments

Markup and margin methods can be confusing!!
The markup method is the example you have cited in your post, where:
Sales price = 140%
Profit = 40%
Cost = 100%
The margin method works slightly differently. The margin method looks at the gross profit margin achieved. To calculate the gross profit margin the calculation is:
Gross profit / sales x 100 = gross profit margin (expressed as a %).
To calculate the selling price using the margin method this is how we do it:
Cost = 60%
Margin = 40%
Selling price = 100%
Therefore:
£900 x 100/60 = £1,500.
To check we have done this correctly:
Sales price = £1,500
Cost = £900
Gross profit = £600
Therefore divide £600 into £1,500 x 100 and the GP margin, is 40%
Best regards
Steve0 
Wow Thank you so much! really helped me understand :thumbup1:0
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