Markup (business)
From Wikipedia, the free encyclopedia
Markup is a term used in marketing to indicate how much the price of a product is above the cost of producing and distributing the product. It can be expressed as a fixed amount or as a percentage. There are numerous variations of each.
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[edit] Determination
[edit] As a Fixed Amount
- Assume:
- Retail list price = $1.99
- Product cost is $1.40
- MARKUP = price - cost
- 1.99 - 1.40 = .59
- Assume the actual selling price was $1.60
- MARKDOWN = List price - selling price
- 1.99 - 1.60 = .39
- INITIAL MARKUP = list price - cost
- 1.99 - 1.40 = .59
- MAINTAINED MARKUP = sale price - cost
- 1.60 -1.40 = .20
- MARKDOWN = List price - selling price
[edit] As a Percentage
Algebra:
- Markup = x\% = (x / 100) = .x
- example: 15\% = (15 / 100) = .15
- (Original * Markup) + Original = Total
- Using the distributive property of elementary algebra:
Original * (Markup + 1) = Total
Solved for Markup:
(Total / Original) − 1 = Markup
Solved for Original:
Total / (Markup + 1) = Original
Markup is the decimal representation of the markup percentage.
Original is the original amount/price.
Total is the marked up amount/price.
Specific:
- INITIAL MARKUP % = initial markup / sale price
- .59 / 1.99 = 29%
- MAINTAINED MARKUP % = maintained markup / sale price
- .20 / 1.60 = 13%
- MARKUP % ON COST = markup / cost
- .59 / 1.40 = 42%
- Markup percentage on a price = markup / price
- .59 / 1.99 = 29%
- To convert from markup on price to markup on cost:
- MARKUP ON COST = markup % on price / 1 - markup % on price
- .29 / (1 - .29) = 42%
- MARKUP ON COST = markup % on price / 1 - markup % on price
- To convert from markup on cost to markup on price:
- MARKUP ON PRICE = markup % on cost / 1 + markup % on cost
- .42 / (1 + .42 ) = .29
- PRICE = cost / 1 - markup % on price
- 1.40 / (1 - .29) = 1.99
- COST = price / 1 + markup % on cost
- 1.99 / (1 + .42) = 1.40
- PRICE = markup / markup % on price
- .59 / .29 = 1.99
- MARKUP ON PRICE = markup % on cost / 1 + markup % on cost
[edit] Some Customary Markup Percentages for Retail Businesses
Using the formula (price - cost) / price
- New cars 15%
- Used cars 75%
- Electrical Appliances 30%
- Clothing 50%
- Trend Clothing 59%
- Cosmetics/Fragrances 75-80%
- Crystal Ware 60%
- Gifts and clocks 55%
- Food Retailers 45%