Difference between Markup Percentage Price and Margin Percentage Price:
Many business often use concepts of margin and markup as guides for setting the prices of their products. The terms of markup and margin are frequently used in accounting to express relationship of gross profit with cost of sales and sales respectively.
Markup – Definition, Explanation and Formula:
Markup is gross profit as a percentage of cost of sales and calculated as:
Gross Profit / Cost of Sales x 100
If a business’s markup is 25%, it means business gross profit is equal to 25% of cost of sales or it means 25% of cost is added into cost as profit to arrive at selling price or selling price is equal to 125% of cost.
“Markup is therefore the percentage added to cost price to arrive at selling price”.
Margin – Definition, Explanation and Formula:
Margin is defined as gross profit as a percentage of sales and is calculated as:
Gross Profit / Net Sales x 100
If a business’s margin is 20%, it means business gross profit is equal to 20% of sales.
“Margin is the percentage deducted from the selling price to find the cost price”.
Solved Example – Markup Percentage and Margin Percentage:
The sales revenue of a business in the last year was $200000, whereas cost of sales for the same year was $150000.
Calculate the markup (%) and margin (%) for the last year.