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 Question from Adrian: I am working to increase pricing by 5%. If the price is 100, I would typically use the formulas 100 * 1.05 = 105, which is a $5 increase. An associate suggests I divide to get the desired increase. For example, using$100 with a 5 percent increase. I would use the formula 100/.95 = 105.26. This is a 5.26 increase. Can you explain this method to me an why the different increases? Which one is correct. Thanks, Adrian

The important question here is percentage of what? In your calculation you add 5% of your price, $100, to get$100 + 0.05 × $100 =$105. Your associate on the other hand is looking at this problem from your customer's point of view., Your customer sees his cost, $x, and says that the markup is 5% of his cost. Hence your cost is 95% of his cost,$x, that is $100 = 0.95 ×$x and thus \$x = 100/0.95.