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How to work out gross profit margin & gross profit mark up figures?

geek84geek84 Trusted RegularMAAT Posts: 567
Hi Folks

I am on level 3 at the moment & having difficulty working out gross profit mark up & margin figures. I basically know the formulas but very often there are other bits of information that you need to work out before working out the margin or mark up figures.

Could someone be kind enough to explain to me how these figures are worked out if only a limited amount of information is given.

Thanks in advance for your response.

Comments

  • piratepirate Trusted Regular Registered Posts: 469
    Profiit = Selling Price -Cost Price
    Markup = (Profit / cost price) x 100
    Profit Margin = (Profit / selling price) x 100

    So if we are told that Margin is 20% and cost price is £40 and Profit is £10 we can work out what the selling price is by using mathematical equations, when we move a figure to the otherside we do the opposite calculation so a mulitply becomes a divide a minus become a plus etc
    Profit = selling Price - Cost price
    so 10 = S-40
    So moving the -40 to the other side we get
    10+40 = S
    So selling price is £50

    To do the calculation to be sure
    we have
    Profit Margin = (Profit / selling price) x 100
    So
    (10/50)*100 = 20%
    We can also work out the Markup as we have the right figures
    Markup = (Profit / cost price) x 100
    (10/40)*100 = 25%
  • geek84geek84 Trusted Regular MAAT Posts: 567
    Hi Pirate

    Many thanks for your reply. However, some of the questions I am doing require finding values for cost of sales goods and gross profit.

    Can you be kind enough to give me an example including these?

    Thanks in advance.
  • piratepirate Trusted Regular Registered Posts: 469
    hi Geek84
    you did only mention margin and markup
    Could you give me an example of what it is you would be provided with in order to find Cost of Sales and Gross Profit, then I can use it as an example to show you
    thanks
    K
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    Margin 30%

    Cost 70
    Profit 30
    Total 100

    (margin relates to % of profit on "Total" selling price)


    and


    Mark up 30%

    Cost 100
    Profit 30
    Total 130

    (mark up relates to % profit on cost)


    If you can get your head around the relationship between the amounts above, you can answer all questions that relate to margin and mark up :)
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    Have you had any luck figuring this out?
  • geek84geek84 Trusted Regular MAAT Posts: 567
    Yes Thanks.

    I've done it now.
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