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.

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.

Calculation of a 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

Finding the Percentage of Mark-Up

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

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


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