Mark-up is not margin
Mark-up is profit as a share of cost. Margin is profit as a share of the selling price. Mixing them up means charging too little.
In this room: 3 tasks, 9 questions
- Two percentages from one sale3 questions
- Why the mark-up is always the bigger figure4 questions
- Pricing for a mark-up or for a margin2 questions
Both start from the same profit on a sale: selling price less cost. They divide it by different figures.
- Mark-up
- profit as a percentage of cost: profit ÷ cost × 100
- Margin
- profit as a percentage of the selling price: profit ÷ selling price × 100
| Product | Cost | Selling price |
|---|---|---|
| Town bike | 250.00 | 400.00 |
| Helmet | 20.00 | 25.00 |
Answer the questions below
2 more questions follow in this task.
Cost is smaller than the selling price, so the same profit is a bigger share of cost. On any sale at a profit, the mark-up is higher than the margin.
| Item | £ |
|---|---|
| Selling price | 25.00 |
| Cost | (20.00) |
| Profit | 5.00 |
A business that wants a margin, but adds that percentage to cost, ends up with a smaller margin than it planned.
Answer the questions below
3 more questions follow in this task.
To price for a mark-up, add the percentage to the cost.
To price for a margin, work back from the selling price. For a margin of 40%, the cost is the other 60% of the price, so the price is cost ÷ 0.6.
A bike lock costs Fernhill £12 before VAT.
Answer the questions below
1 more question follows in this task.