mark up questions

Question

A), selling price = 260.00

   Rate on markup on cost =25.00

 

what is the cost, amount of markup,and rate of markup on selling price 

 

B), cost = 60

  rate on markup on selling price = 32.00 

what is the amount of markup, rate of markup on cost and selling price 

Answer 1

First sophisticated (re-sellers) retailers and wholesalers always use their selling price as the basis for calculating mark-on, mark-up, gross margin or gross profit. After all, the firm's profitability is based on revenue not cost and revenue is a direct function of the firm's selling prices. With this background,

A)    $ Cost is unknown and $ Cost is (100% or 1) of Cost

       $ Selling Price = $260

       % Mark-up on cost method = 25% or .25

       $ Cost = SP / (1+mark-up%) = $260/(1+.25) = $260/1.25 = $208

Proof: $Cost x 1.25% = SP = $208 x 1.25% = $260 when you are marking up your cost to get your selling price.

       $Mark-up amount on cost = $SP-$Cost = $260-$208 = $52

       Rate of mark-up on $Cost = 25% which is given

       Rate of mark-up on $SP = $MU/$SP = $52/$260 = 20% (significantly less than the MU% on $Cost  

 

 

B) $ Cost is $60
    $ Selling Price is unknown and $SP is (100% or 1) of $SP 
    % Mark-up on $SP method = 32% or .32 is given
    $ SP = $Cost / (1- MU%)

            = $60) / (1-.32)

            = $60 / .68

            = $88.23
Proof: $88.23-$60 = $28.23 or 32% of the $88.23 SP

    Amount of $MU = $28.23

    Rate of MU on $Cost = $28.23 / $60 = 47.05%

    Rate of MU on $ SP =  $28.23 / $88.23 = 32%