Thought I understood Margins
jewels.p
Registered Posts: 1,774
Still doing the FRA June 07 Exam and attempted Task 2.7 on Margins and Markups I managed to calculate the Mark Up OK but got the Margin completely wrong!:crying:
Cost Price = £900
It asks what the Selling Price would be if the Sales Margin was 40%. Reading the correct answer from the website I just dont understand this. :confused1:
The ones I have done in the past have given you the Sales Figure to calculate the Margin. Can anyone tell me an easy way to calculate Margins?
Everything I am revising just now I am getting the wrong answers. Nightmare!
Cost Price = £900
It asks what the Selling Price would be if the Sales Margin was 40%. Reading the correct answer from the website I just dont understand this. :confused1:
The ones I have done in the past have given you the Sales Figure to calculate the Margin. Can anyone tell me an easy way to calculate Margins?
Everything I am revising just now I am getting the wrong answers. Nightmare!
0
Comments

For a five percent margin, divide the cost price by 0.95.
For a ten percent margin, divide the cost price by 0.9.
For a fifteen percent margin, divide the cost price by 0.85.
For a twenty percent margin, divide the cost price by 0.8.
For a twentyfive percent margin, divide the cost price by 0.75.
For a thirty percent margin, divide the cost price by 0.7.
See the pattern?
so... you would have done 900 / .6 = 1,5000 
Hello,
The way I remembered was: 
Margin  Sales will represent 100%
Markup  Cost of Sales will represent 100%
So using in in your question,
Selling Price = 100% Margin = 40% so COS = 60%
£ 900 / 60 * 100 = £ 1,500 Selling Price
For Markup, if you know that COS = £ 900 and marked up by 40% then,
£ 900 / 100 * 140 = £ 1,260 Selling Price0 
Whenever the word said
Sale Margin = 40% always think it as GP. then find out the COS % which is 60%
Is that right method?0 
For margin:
Cost of sales 60%
Gross profit 40%
Selling price 100%
Markup:
Cost of sales 100%
Gross profit 40%
Selling price 140%
I hope that helps!0 
Be careful, the above message for calculating markups is incorrect.
Eg.
Sales 140
COS 100
GP 40
In this the Gross Profit Margin is not 40% it is actually 28.6 %
40/140 * 100 = 28.6
Just practice these questions with your own best method and after a while they shouldn't be any problem.0 
Be careful, the above message for calculating markups is incorrect.
No, that's 40% markup. They've just labelled it as gross profit, which is what's wrong, percentages don't work like that.
This is how it should have looked:
40% Margin
Cost of sales 60%
Gross profit 40%
Selling price 100% (which is cost divided by 100%40%=60%)
40% Markup
Cost of sales 100%
Markup 40%
Selling price 140% (which is cost multiplied by 100%+40%=140%)
Markups are easier; to get a selling price including n% markup, multiply the cost by 100%+n%.
Margins are slightly trickier; to end up with a margin of n% on cost, the selling price needs to be divided by (100%n%) of cost.0
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