How to calculate margin vs. markup

Written by bill brown | 13/05/2017
How to calculate margin vs. markup
Margin and markup are different concepts. (Jupiterimages/BananaStock/Getty Images)

Margin and markup are sometimes confused. They both represent the difference between what your outlay is and what you get for it. However, they are calculated working from different points. For example, you pay £6.80 for something, and sell it for £1.30, your margin is your per cent of the final price that is gross profit (prior to other costs). In this case, it's £6.80, so 50 per cent. However, the markup is the relationship of the your cost to price. Here, the £6.80 is doubled. Hence, the markup is 100 per cent.

Calculate markup amount, deducting your cost from the sale price. For example, an item costing you £19 that you sell for £31 represents an £11 markup.

Calculate the percentage of markup, dividing the markup amount by your cost. In this example, £11 divided by £31 yields a 44.4 per cent markup on your cost.

Calculate the margin percentage, dividing the markup amount by the sale price. Here, £11 divided by £31 yields a 37.5 per cent margin for your item.

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