 # Cost Price, Sales Price, Mark-Up

Q: How do you find the cost price if the sales are \$216,000 and the mark-up is 50%?

A:
"Mark-up" literally means the amount you "mark up" the cost by. This means the amount you increase the cost by to get to the selling price, and is expressed as a percentage of the cost. "Mark-up" is basically another way of saying the profit - the difference between the sales price and the cost - but specifically referring to the cost as the starting point or basis of the calculation.

In this example the profit (mark-up) is 50% of the cost price. For the purpose of our calculation, the cost will amount to 100% since it is our starting point or basis.

If we put all this into an equation this simplifies to:

Mark-up / Cost = 50/100

Now let's substitute that first equation above into a general equation for sales, cost and mark-up:

Selling price = Cost + Mark-up (profit)
Selling price = 100% + 50%
Selling price = 150%

In other words, the selling price is 150% of the cost (100%).

Therefore:
Cost = 100/150 X Selling price
= 100/150 x \$216,000
= \$144,000

Hope that question and solution helps you better understand the differences between cost price, sales price and mark-up.

Check out the comments below for more questions on sales, cost price and mark-up with accompanying solutions.

Best,
Michael Celender
Founder of Accounting Basics for Students Related tutorials:
For more free questions check out our page of Full Accounting Questions and Answers

### Comments for Cost Price, Sales Price, Mark-Up

 Gross Profit Percentage, Sales, Trade Discount Question by: Anonymous Sales was given as 4,741,600, The business prices it goods at mark-up of 70% on cost. Trade discount of 297,200 was disallowed on invoices to certain customers.Don’t understand how to resolve this...I'm assuming here we need to calculate the Cost of Goods Sold figure or the Profit figure. To do this we need the Sales figure and then we use the 70% mark-up to calculate the rest.Here's my understanding and answer:First of all, trade discount is a discount taken off the sales usually, it's a general discount given by one business to another and not recorded in the books. You take sales and minus trade discount to get the actual sales figure.To me it sounds like the trade discounts of 297,200 were used to get the sales figure of 4,741,600 (X full sales figure - 297,200 = 4,741,600 actual sales). But then after calculating like this, for some reason these discounts were disallowed.So we need to figure out the corrected amount of sales by adding back the trade discount amount:= 4,741,600 + 297,200= 5,038,800Now, mark-up of 70% is based on the cost of sales and profit figure and means:70/100 = Mark-up (Profit) / Cost of SalesSelling price = cost + profit (mark-up)Selling price = 100% + 70%Selling price = 170% of CostSwapping the above around we get:Cost = Selling Price / 170%= 5,038,800 / 170%= 2,964,000 Cost of SalesProfit = Sales - Cost of Sales= 5,038,800 - 2,964,000= 2,074,800 ProfitHope that makes sense!Best,Michael CelenderFounder of Accounting Basics for Students

 Mark-Up Equation with VAT Inclusive by: Sebastian Hi there.I am troubled with this question here."Gromit Dealers sells merchandise for R6325 (15% VAT inclusion) to a client. The markup on selling price is 25%. What is the cost price of the merchandise?"I've tried every way possible, to my understanding, to try and figure this out.Does the VAT affect the calculation or not?What is the answer?Hi Sebastian and thanks for your question.Yes, the VAT affects the calculation.The way I would go about this is actually to remove the VAT first, since the cost and sales accounts always exclude VAT. The calculation of mark-up is always based on accounts without VAT (cost and sales accounts). So let's remove the VAT first:R6,325 x 100/115 = R5,500So the sales (VAT excluded) is R5,500.Now let's use our cost, mark-up and sales equation to get the answer:Cost + Mark-Up = SalesCost + [(25/100) x Cost] = Sales[(100/100) x Cost] + [(25/100) x Cost] = Sales[(125/100) x Cost] = R5,500Cost = R5,500 / (125/100)= R4,400So the cost price of the merchandise is R4,400.Hope that explains things and that this is the same as the answer they provided in your studies.Best,Michael C.Founder of Accounting Basics for Students

 Mark-up of 120% by: Anonymous If I have a selling price of \$25 and a mark up of 120%, what would the cost price be?As mentioned, when we're dealing with "mark-up" we're using the cost price as our base - so the cost price is the 100% and the mark-up is based on this.What makes this particular question pretty tricky is that the mark-up, meaning the increase from cost price to selling price, is very high - above 100%. Usually the mark-up is below 100% - for example, 20% or 30%.The mark-up of 120% means the increase to get the selling price is equal to 120/100 of the cost. In other words, the increase ("mark-up") is even greater than the cost itself!The selling price is equal to the cost price plus the mark-up. In this example, the selling price is 100% + 120% = 220% of the cost price.Cost price = 100/220 x selling price= 100/220 x \$25= \$11.36So the cost was \$11.36, the increase (mark-up) was \$13.64, bringing our selling price to \$25.Hope that has helped simplify things a bit!Best,Michael CelenderFounder of accounting-basics-for-students.com

 Confused by: Anonymous My selling price is \$168.75 and the mark up is 25% so what is my cost?Remember that when we're dealing with "mark-up," this means we're using the cost as our base and the cost price is thus 100%. The mark-up of 25% means the increase to get the selling price is equal to 25/100 of the cost or 25%.The selling price is equal to the cost price plus the mark-up. In this example, the selling price is 100% + 25% = 125% of the cost.Cost price = 100/125 x selling price= 100/125 x \$168.75= \$135Best,Michael CelenderFounder of accounting-basics-for-students.com

 Mark-Up Question: Calculate the Cost Price and Selling Price by: Anonymous If I have a profit of R700 and a mark-up on cost of 50%. What is the cost price and the selling price? Mark-up percentage = Profit / Cost PriceSwitching this formula around:Cost Price = Profit / Mark-up percentage= R700 / 0.50= R1,400Selling Price = Cost Price + Profit= R1,400 + R700= R2,100Hope that helps!Michael Celender