Thought I understood Margins

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!

Comments

  • Esme
    Esme Registered Posts: 711
    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 twenty-five 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 = 1,500
  • crispy
    crispy Registered Posts: 465 Dedicated contributor ? ? ?
    Hello,

    The way I remembered was: -

    Margin - Sales will represent 100%
    Mark-up - 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 Mark-up, if you know that COS = £ 900 and marked up by 40% then,

    £ 900 / 100 * 140 = £ 1,260 Selling Price
  • any2002uk
    any2002uk Registered Posts: 88 ? ? ?
    Whenever the word said
    Sale Margin = 40% always think it as GP. then find out the COS % which is 60%
    Is that right method?
  • mally
    mally Registered Posts: 14 Regular contributor ⭐ ? ⭐
    For margin:
    Cost of sales 60%
    Gross profit 40%
    Selling price 100%

    Mark-up:
    Cost of sales 100%
    Gross profit 40%
    Selling price 140%

    I hope that helps!
  • crispy
    crispy Registered Posts: 465 Dedicated contributor ? ? ?
    Be careful, the above message for calculating mark-ups 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.
  • Bookworm55
    Bookworm55 Registered Posts: 479
    Be careful, the above message for calculating mark-ups 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% Mark-up
    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.
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