# 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 (the amount you increase it by) to get to the selling price.

The percentage (50%) is based on the cost - i.e. the profit (mark-up) is 50% of the cost price. In an equation this simplifies to:

Mark-up (profit) / cost = 50/100 (50% of cost)

Selling price = cost + profit (mark-up)
Selling price = 100%+50%
Selling price = 150%

Therefore cost = 100/150 X \$216,000 = \$144,000

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

Best,
Michael Celender
Founder of Accounting Basics for Students Related tutorials:

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

 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