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.

Cost Price Sales 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.

Check out the comments below for more questions about this topic.

Related tutorials: - Michael Celender
Founder of Accounting Basics for Students


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Comments for Cost Price, Sales Price, Mark-Up

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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 = R5,500

So 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 = Sales
Cost + [(25/100) x Cost] = Sales
[(100/100) x Cost] + [(25/100) x Cost] = Sales
[(125/100) x Cost] = R5,500
Cost = R5,500 / (125/100)
= R4,400


So 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
= $11.36

So 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 Celender
Founder 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
= $135

Best,
Michael Celender
Founder 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 Price

Switching this formula around:

Cost Price = Profit / Mark-up percentage
= R700 / 0.50
= R1,400

Selling Price = Cost Price + Profit
= R1,400 + R700
= R2,100

Hope that helps!

Michael Celender

Answer
by: Anonymous

$33.05

Answer
by: Anonymous

33.7312525

Shoes online( please answer quickly)
by: Anonymous

You are buying shoes online.The selling price is $29.99. Round to the nearest penny if necessary.

A.The sales tax is 6.5%. What is the total cost?

B. The cost of shipping is 15% of the total cost.What is the total cost plus shipping?

C. If the total cost plus shipping is greater than $35 then you receive a 10% discount off the original selling price.Do you qualify? If so, what is the new total cost plus shipping?

What is the Selling Price Based on Mark-up?
by: roselyn

How to find the selling price for a chair if it cost the retailer $225 if the retailer has a 55% markup based on cost?

Selling price = cost + mark-up
= 100% + 55%
= 155%

Selling price = 155/100 x $225
= $348.75

- Michael Celender
Founder of Accounting Basics for Students

Loss
by: EmoLover

If an article is sold at a loss of 25% and was bought for $1250, find the cost price.

Inventory
by: Hassan

Opening stock = 39,700.00
Purchases = 453,000.00
Sales = 551,000.00
Closing balance= ?????????
if markup 30%


To solve this problem you have to know the cost of sales formula and what mark-up percentage means. You may want to check out my lesson on Sales, Cost of Goods Sold and Gross Profit before continuing here.

The cost of goods sold formula:
Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory

Closing Inventory formula:
Closing Inventory = Opening Inventory + Purchases - Cost of Goods Sold

Closing Inventory = 39,700.00 + 453,000.00 - Cost of Goods Sold


But they don't give us cost of goods sold, only the sales.

So we use the sales figure and mark-up to get the cost of goods sold.

Cost of Goods Sold = 100/130 X Sales
= 100/130 X 551,000.00
= 423,846

Closing Inventory = 39,700.00 + 453,000.00 - Cost of Goods Sold

Closing Inventory = 39,700.00 + 453,000.00 - 423,846
= 68,854


Hope that helps understand mark-up, cost of good sold and closing inventory!

Best,
Michael Celender

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