Cost Accounting

Concept and Calculation of Mark Up

 

What is Mark Up?

Mark up is the percentage or amount added to the price or quote in the production of goods or services to cover costs and produce a profit. Businesses have a purpose of producing the largest profit available, without a markup, businesses will be running at breakeven levels producing no profit.

 

For example, if a painter was asked for a quote for a job and the job cost $100 but he quoted the customer $110, then the markup would be 10% or $10.

 

Calculation of Mark Up

To calculate a markup simply multiply the cost of a manufacture of a product or delivery of a service by the percentage amount.

 

Example 1:  If a job cost $150.

A 20% markup would be:

= $150 * 1.20

= $180

 

Example 2: If a job cost $200

A 15 % markup would be:

= $200 * 1.15

= $230

 

Example 3: If a job cost $500

A 45% markup would be:

=$500 *1.45

=$725

 

Finding the Percentage Markup

While this is unlikely to show up in a test or exam, to find the percentage markup remember:

(New -Old)/Old * 100

 

Example 1: If a quote was $725 and the cost of the job is $500.

The markup would be:

= (725-500)/500 *100

=225/500 *100

= 0.45 *100

=45%

 

Example 2: If a quote was $800 and the cost of the job is $600

The markup would be:

=(800-600)/600 *100

=200/600 *100

=0.33 *100

=33%​

 

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