Markup (business)

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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.

1 Determination
- 1.1 As a Fixed Amount
- 1.2 As a Percentage
2 Some Customary Markup Percentages for Retail Businesses
3 See also

[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

[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:

$O r i g i n a l * (M a r k u p + 1) = T o t a l$

Solved for Markup:
$(T o t a l / O r i g i n a l) - 1 = M a r k u p$

Solved for Original:
$T o t a l / (M a r k u p + 1) = O r i g i n a l$

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%

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

[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%

Categories: Articles lacking sources | Cleanup from August 2006 | Pricing | Marketing

Markup (business)

From Wikipedia, the free encyclopedia

Contents

[edit] Determination

[edit] As a Fixed Amount

[edit] As a Percentage

[edit] Some Customary Markup Percentages for Retail Businesses

[edit] See also

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