Mark up and margin

Mark Up and Margin
Mark-up and Margin are two ways of measuring profit using percentages.


Mark-up Margin
This looks at the percentage of the cost price that you add This is the percentage of the selling price that is profit. This
on to get the selling price. This method is usually used in method is usually used when looking at retail gross profits.
manufacturing when calculating selling prices.
Use cost of sales (or cost) as 100%. Use sales as 100%.
The structure of this with a mark-up of 20% is as follows: The structure of this with a mark-up of 20% is as follows:

Cost 100% Sales 100%
Mark-up 20% Margin 20%
Sales (100+20) 120% Cost (100-20) 80%

Example: An item cost £2,000 to make, the mark-up of the Example: If the cost of an item is £230 and there is a margin
item is 20%, calculate the selling price. of 15%, what is the selling price?

Cost 100% £2,000 Sales 100% = £270.59
Mark Up 20% £ 400 Margin 15% = £ 40.59
Sales 120% £2,400 Cost (100-15) 85% = £230.00

NOTE The key to dealing with mark-ups and margins is in setting up the cost structure of the sales, in percentage terms
from the information given.