Cost Accounting

Concept and Calculation of Mark Up

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Priya Kaur

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Christian Bien

Learning Objectives

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What is Mark-Up?
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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. In other words, it's the % of gross profit on a sale or providing a service. 

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.

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Calculation of a Mark-Up
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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

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Finding the Percentage of Mark-Up
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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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Time Orientation of Costs
Treatment of Costs
Relationship Costs
Behavioural Costs
Concept and Calculation of Mark Up
Direct Material Price Variance
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