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 Question from Tammy: How can a markup of 30% be calculated by using 1.43 times the original cost? Where does the 1.43 come from? For example: the original cost is 830.00 the markup is 30 %. The selling cost is 1186.90. My boss uses 1.43 to figure the mark up for 30% and 1.23 for 25% and 1.1 for 10%. What I want to know is how do they come up with these figures?

Hi Tammy.

Here's where your boss is getting this value: She is saying that 30% of the selling price is her markup. That means, for example, that 30% of $1186.90 is the markup (0.30 x$1186.90 = $356.07). If you add that to the original cost of$830, you get \$1186.07, which is very close to the selling price (the difference is due to rounding).

So it is a matter of perspective. 30% of the final price is the amount you add to the original cost.

Now take a look from this perspective: If 30% of the final cost is the markup, then the original cost is 70% of the final price, right?

But when you have the original cost and need to know the final price, then you have a figure that is 70% of the final price, but you want the 100% price. So you multiply by 100%/70% which is 10/7 which is 1.43 !

Mathematically, we say that if C is the original cost and P is the final price, then

70% x P = 100% x C

If you have the final price P and want the original cost C, then you solve this for C:

C = P x 70% / 100% = P x 0.7

But if you have the original cost C and want to know what final price you should sell for in order to get the 30% markup, then you solve for P instead:

P = C x 100% / 70% = C x 1.43

There is some debate over whether or not this should be called "markup" or "margin" or something else. Do a search on the word "markup" in your dictionary or on our site to find out more about the words and how they are used in different situations.

Cheers,
Stephen La Rocque

Math Central is supported by the University of Regina and The Pacific Institute for the Mathematical Sciences.