Mark Up & Margin

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:30AM in AAT student discussion
Need the mark up and margin explaining. Say if the margin is 30% i have been told that this makes the sales figure 130% and when using mark up 30% is to be applied to the sales figure.<BR><BR>Is this right, is there an easier way?<BR><BR>Many thanks for your help.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Mark Up & Margin

    I was having a nightmare with this too until my husband sat down with me for an hour last Sunday to explain it!<BR><BR>The following calculations are based on a mark-up of 25% and a margin of 20%;-<BR><BR>1) If the sales figure & mark-up % is known, cost of sales = sales x 100/125 i.e. 10000 x 100/125=£8000 cost of sales<BR><BR>2) If the cost of sales figure & margin % is known, sales = cost of sales x 100/80 i.e. 8000 x 100/80= £10000 sales<BR><BR>In other words, you are either adding the mark-up % to 100 or subtracting the margin % from 100 depending on whether you are trying to work out the cost of sales figure or the sales figure.<BR><BR>There is probably a much simpler way of working all this out but this was the only way I could understand. The Financial Training Company textbook does go into great detail over this and gives lots of examples but I personally found it all rather confusing! Fortunately, my husband did understand it and was able to explain it to me in simpler terms.<BR><BR>Hope this helps.<BR><BR>P.S. I assume that you already realise that mark-up is applied to cost of sales and margin is applied to sales. Then it's just a simple percentage calculation to work out how much to add on to get your sales figure or take off to get your cost of sales figures. It does get a bit trickier when one of these figures is unknown.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Mark Up & Margin

    Talamascan,<BR><BR>Thank you for your help, bit of a tricky subject!<BR><BR>Thanks again

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