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Question from Lorriane:

I work for a plumbing company and our new financial manager said we should mark up all parts we buy by 142.86 to get a 30% mark up, however if we buy something for $\$100.00$ we charge $\$130.00$ being 30%.
If we use the other method the customers will be paying $\$142.86$ for $\$100.00$ and they still say that this is only 30% mark up.
We have for years been taught percentages at school and also the Government charges us 15% GST which on $\$100.00$ would be $\$15.00$ so who is correct.
Thank you for your wonderful web site
Lorriane

You are 100% correct. When computing with percentages, a person must be clear about what he’s taking the percentage of. For establishing a price markup one starts with the invoice price (the cost of the product to your company), so compute the appropriate percentage of the invoice price; in your example that would be 30% of $\$100,$ which comes to a $\$30$ markup. Your financial manager took 30% of the selling price; that is, 30% of $\$142.86$ is $\$42.86.$ In other words, 30% of his selling price represents profit, not markup; his markup would be 42.86%.

Chris

Lorriane,

What your financial manager is talking about is called the margin not the markup. A 30% margin is 30% of the selling price.

Penny

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