How To Calculate Markup
Question
What is the other item to receive a markup in this video?
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Hi, my name is Grant Hobson. I work as a finance analyst, and today I'm going to talk you through some business math calculations and ratios. How to calculate markup. Markup is basically for a retailer where he gets goods in, doesn't want to do any additional work on them, and sells them on. So the difference between the purchase price and the sales price, is the markup an issue on it? Sometimes, there's a confusion between markup and margin, so it's worth looking into how to calculate margin if you're not aware of that calculation and I'll run for you an example of how that markup works. In calculating the markup, we're going to take an example where we've got a TV that sells for £240 but cost £200. The equation's quite simple, the first step when it's calculated in the difference in price, so we have that step here which is simply 240 less 200 which gives us a 40-pound difference. Now I'm going to calculate the markup which is divided by the difference in the price by the cost of the goods sold. Basically, we do 40 divided by 200, it shows that we have a markup of 20%. Now, what you may also want to know is that in my shop, I do a consistent markup across the products that I have just for simplicity, it's not realistic from what should be the markup. So to just demonstrate, so I have another product which is a laptop which we want to sell at the same markup as the TV. And so what price should this be? So if it costs 350, I'm trying to find my sales price and I want a 20% markup to be in line with the TV. So basically, the markup is simply 1+r, that's our step 1, 1+r, equals 1.2. So we then, of the sales price, 350 times by that markup gives us 420. So 350 times by the markup is 420. You can check that this works by simply doing 420 less 350, 70 and you do 70 divided by the original cost of the good and you get 20%.