Mark ups and Margins ... HELP!!!

Mollypod88
Mollypod88 Registered Posts: 155 Beyond epic contributor 🧙‍♂️
in AAT Level 3 (Level 6 in Scotland)
Hi All,

I need an idiots guide to mark ups and margins .... please help!!!!

Comments

  • MarkT
    MarkT Registered Posts: 302
    Ok - with your mark up - your cost of goods is always 100% and with the margin, the sales figure is always 100%.

    So, lets take 3 figures

    Mark up
    cost of sales 100% £1680
    Profit + 25% £420
    Sales = 125% £2100

    These same figures but in a different manner:

    Margin
    cost of sales 80% £1680
    Profit 20% £420
    Sales = 100% £2100

    all you need to remember is to multiply for a mark up and divide for margin

    Hope this helps :)
  • Louise89
    Louise89 Registered Posts: 296 Dedicated contributor 🦉
    MarkT wrote: »
    Ok - with your mark up - your cost of goods is always 100% and with the margin, the sales figure is always 100%.

    The only thing I would add is...

    Mark Up (i.e. you mark up your sales higher than 100%)

    Sales 125%
    Cost of Sales 100%
    Gross Profit 25%

    Margin (Margin inside 100%)

    Sales 100%
    Cost of Sales 75%
    Gross Profit 25%


    Thats how I remember it.
  • Haysah
    Haysah Registered Posts: 80 Epic contributor 🐘
    Louise89 wrote: »
    The only thing I would add is...

    Mark Up (i.e. you mark up your sales higher than 100%)

    Sales 125%
    Cost of Sales 100%
    Gross Profit 25%

    Margin (Margin inside 100%)

    Sales 100%
    Cost of Sales 75%
    Gross Profit 25%


    Thats how I remember it.


    This is how I remember it to :001_smile:
  • Louise89
    Louise89 Registered Posts: 296 Dedicated contributor 🦉
    Haysah wrote: »
    This is how I remember it to :001_smile:

    :D
  • louby
    louby Registered Posts: 8 Regular contributor ⭐
    Hi
    The Learning zone on the AAT website has a fantastic section on markup and margin. I really had to think about it in class but when i went through the learning zone section once it clicked straightaway.
    I'd definitely recommend it! :)
  • Kirsty83
    Kirsty83 Registered Posts: 57 Epic contributor 🐘
    Louise89 wrote: »
    The only thing I would add is...

    Mark Up (i.e. you mark up your sales higher than 100%)

    Sales 125%
    Cost of Sales 100%
    Gross Profit 25%

    Margin (Margin inside 100%)

    Sales 100%
    Cost of Sales 75%
    Gross Profit 25%


    Thats how I remember it.


    That's how I remember it too!
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
    Louise89 wrote: »
    The only thing I would add is...

    Mark Up (i.e. you mark up your sales higher than 100%)

    Sales 125%
    Cost of Sales 100%
    Gross Profit 25%

    Margin (Margin inside 100%)

    Sales 100%
    Cost of Sales 75%
    Gross Profit 25%


    Thats how I remember it.

    Although in your mark up example, gross profit ends up being 20% (25/125)
  • Louise89
    Louise89 Registered Posts: 296 Dedicated contributor 🦉
    PGM wrote: »
    Although in your mark up example, gross profit ends up being 20% (25/125)

    You've confudled me now PGM!!

    Without looking at my notes I'm pretty sure its 125% - 100% - 25% as the profit is sales less cost of sales...
    125-100=25 ?
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
    Louise89 wrote: »
    You've confudled me now PGM!!

    Without looking at my notes I'm pretty sure its 125% - 100% - 25% as the profit is sales less cost of sales...
    125-100=25 ?

    So you've bought your hat for £100, added 25% mark up, selling price £125.

    Then when you work out your gross margin % (gross profit / revenue)

    £25 / £125 = 20% gross profit.

    You make more profit using the same % of margin compared to mark up.
  • Louise89
    Louise89 Registered Posts: 296 Dedicated contributor 🦉
    Oh I see what you're saying... I've explained it wrongly,


    Mark Up

    Sales 125%
    Cost of Sales 100%
    Gross Profit 25% <<< I meant this to be Mark Up % , then the Gross profit would be as you quite rightly said 20%

    So;

    Mark Up (i.e. you mark up your sales higher than 100%)

    Sales 125%
    Cost of Sales 100%
    Mark up 25%
    Profit 20%

    So thats correct now? :D
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
    Louise89 wrote: »
    So thats correct now? :D

    Yeah, I knew what you meant before though :D

    Its a horrible subject. And you never get away from it, when someone tells me to charge 30%, I hate to ask the question mark up or margin..?
  • Louise89
    Louise89 Registered Posts: 296 Dedicated contributor 🦉
    PGM wrote: »
    Yeah, I knew what you meant before though :D

    Its a horrible subject. And you never get away from it, when someone tells me to charge 30%, I hate to ask the question mark up or margin..?

    OH! PGM! Why did you let me make a fool of myself! :p

    I agree... I hope they don't come up too much.
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
    Louise89 wrote: »
    OH! PGM! Why did you let me make a fool of myself! :p

    I'm sorry Louise but the best way to learn mark up and margin is public humiliation!

    Accountancy courses are too soft these days :p
  • MarkT
    MarkT Registered Posts: 302
    PGM wrote: »
    I'm sorry Louise but the best way to learn mark up and margin is public humiliation!

    Accountancy courses are too soft these days :p

    I've been watching this cat and mouse game for a few days now...

    I'm afraid to ask if my post at the top is right now, but I guess it wouldn't hurt if you could let me know :)
  • Louise89
    Louise89 Registered Posts: 296 Dedicated contributor 🦉
    MarkT wrote: »
    I've been watching this cat and mouse game for a few days now...

    I'm afraid to ask if my post at the top is right now, but I guess it wouldn't hurt if you could let me know :)

    What can I say Mark, I've been schooled/accounted! Best ask PGM, he is top dog.
  • Louise89
    Louise89 Registered Posts: 296 Dedicated contributor 🦉
    PGM wrote: »
    I'm sorry Louise but the best way to learn mark up and margin is public humiliation!

    Don't worry, I'll never get it wrong again!
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
    MarkT wrote: »
    Ok - with your mark up - your cost of goods is always 100% and with the margin, the sales figure is always 100%.

    So, lets take 3 figures

    Mark up
    cost of sales 100% £1680
    Profit + 25% £420
    Sales = 125% £2100

    These same figures but in a different manner:

    Margin
    cost of sales 80% £1680
    Profit 20% £420
    Sales = 100% £2100

    all you need to remember is to multiply for a mark up and divide for margin

    Hope this helps :)

    I get the same amounts.
    Louise89 wrote: »
    What can I say Mark, I've been schooled/accounted! Best ask PGM, he is top dog.

    Yes, I specialised in mark up and margin :D
  • MarkT
    MarkT Registered Posts: 302
    PGM wrote: »
    I get the same amounts.



    Yes, I specialised in mark up and margin :D

    I feel much happier now :D

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