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

geek84

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.

pirate

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%

geek84

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.

pirate

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

PGM

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

PGM

Have you had any luck figuring this out?

geek84

Yes Thanks.

I've done it now.