Costs,mark up & margins

sazzle01

Good morning all,

I am just doing my last bit of revision and cost's arn't clear to me, i understand that you value it at thelower of cost and net relisable value,
but i just don't get it really, anyone have any simple explaining meathods?

Also mark up and margins are catching me out to arhhhhhhh help ;-)

Thanks

Rune

MArk up

sales 60000
Cost 100% 42857

Gross Profit 40%

60000/140 = 1% = 428.57 x 100
= 42857

MARGIN

Sales 100% 1538
Cost of sales 65% 1000
GP 35% (100-35=65)

1000/65= 1% = 15038x 100= 1538

DaveIOW

sazzle01 wrote: »

Good morning all,

I am just doing my last bit of revision and cost's arn't clear to me, i understand that you value it at thelower of cost and net relisable value,
but i just don't get it really, anyone have any simple explaining meathods?

Also mark up and margins are catching me out to arhhhhhhh help ;-)

Thanks

I take it your talking stock values.

Cost of stock = the value + how much it took to get it to its position when it was valued (ie delivery charges etc)

NRV = cost as above + what it takes to get it to the customer.

Most of the time the value of the stock would be on its cost. However sometimes the NRV may be lower than the cost, possibly old stock that has gone out of fashion etc so the selling price would be less than the cost just to clear the stock.

So it would be prudent (mention that its the concept behind it!) to value it at the lower of the two.

Margins & Markups

The way I look at it is:

Markups the cost price is 100% & the mark up is say 20%

so cost is £100 / 100 x 120 = £120 ie 120/100

Margin is the difference between the selling price & cost price. This time the selling price is 100% and say margin is 20%

so selling price is £100 / 100 x 80 = £80 ie 100/80

so markup you add it on to the cost price and margin you take it away from the selling price

alicemaylara

here's how I remember mark up and margin

Markup is more than one word as is cost of sales so the 100% goes at cos

Eg
Cos=100%
Sales = 130 %
Mark up = 30%

Margin is only one word as is sales so the 100% goes next to sales

Eg
Sales 100% =
Cos 70% =
Margin =30%=

Hope that helps

sazzle01

Thanks guys great help x