Can anyone explain the difference between markup & margin?
PGM
Registered Posts: 1,954
I understand it, but trying to explain the difference to colleagues is proving to be difficult....
And why a markup of 20% gives a margin of about 17% leaves some baffled :mad2:
And why a markup of 20% gives a margin of about 17% leaves some baffled :mad2:
0
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I don't think about margin when I'm asked about mark up as It got me confused too  they will be different, I sort of understand why but i don't think you have to compare the 2 against each other!0

Mark up is what you add to a figure to produce a new one.
Margin is the difference between the old and new figures.0 
Hi PGM,
If a company were to use a mark up of 20% on a product they bought for £150 then the calculation would be  £150 x 20% = £30, and they would sell it for £180.
If they were selling it £150 with a 20% profit margin, the calcualtion to find the product price would be  £150 x 100/120 = £125, meaning a profit of £25.
Hope that makes sense.
Chris0 
Thanks yes, it does make sense to me. I understand the concept. I've been trying to teach it to colleagues, either I'm a rubbish teacher or they just can't grasp it...
I find that project workers use mark up and managers/accountants use margin. And the project workers (some of) never will understand why the %'s vary slightly.0 
The percentages vary because markup us is a % of cost, whereas margin is a % of selling price. I think I'm right in saying that a 33.3% cost markup is the same as a 25% profit margin, for example. This can be demonstrated if you say that Cost = 100% and that adding a markup of 1/3 gives a Selling Price of 133.3% of original cost. If you then multiply that figure by 25%, the margin, you will get a profit of 33.3% of the original cost price, which gets you back to where you started with your markup.
If that example doesn't make things any clearer, don't worry  as you've already realised, it's not the easiest of concepts to justify; and there are probably better ways of showing it than I managed. The key point is what you are taking the percentage of.
Hope this is of some help0 
I always remembered it as mark up on cost (2 k sounds).
that's the problem sometimes remembering which is which0 
I am confused now
 on the June 08 PEV paper there is a question a product sells for 25.00 and they want at 30% profit margin What is the target Price?
The answer is target price is 17.50
If you do 25 x100/130 = this gives you 19.23 in the assessors report it would appear that many canditates have used this formula
The answer is 25  (25x0.03) = 7.50 257.50 17.50
Can anyone please clarify this as there is only 1 day to go.
Thanks:001_unsure::confused1:0 
if the selling price is 25
and margin 30%
profit is therefore 30% of the selling price 7.50
and the cost is the balance 70% 17.500
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