Quandaries and Queries


I have question regarding Margins, Markups and Profit
I had submitted this question before, however I would like to gove you and example.

Purchase price               =   $ 10.00
Margin or Markup ??       =   40 %
Therefore Selling Price    =      10/0.6 = $ 16.67
Profit ?                          =     (16.67-10)/10 *100     = 66.67%
or is the profit                =      (16.67-10)/16.67*100 = 40 %

Can you please clarify What is Margin, Markup and Profit
Name : Ali



Hi Ali,

I can try to help some. I think the problem is the use of percentage. We become very sloppy with our use of this term, and we really shouldn't use percent without saying "percent of what?"

For example you have the purchase price of an item as $10.00 and a selling price of $16.67. So the price was increased $6.67 from the purchase price to arrive at the selling price. In other words the markup was $6.67.

If you want to express this as a percent I need to know "percent of what?" Since the selling price is $16.67,

 6.67/16.67 100 = 40

so the markup is 40% of the selling price.

On the other hand

  6.67/10 100 = 66.7

so the markup is 66.7% of the purchase price.

The same applies to profit. You bought it for $10.00 and sold it for $16.67 so your profit was $6.67. To express this as a percentage you need to decide if it is to be a percentage of the selling price or a percentage of the purchase price.

I have talked to some people here about margin and we don't have a precise definition. I suggest that you ask an accountant or someone in economics.



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