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

A:

"Mark-up" is basically another way of saying the profit - the difference between the sales price and the cost - but specifically referring to the

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

- What is Inventory?
- Sales, Cost of Goods Sold and Gross Profit
- Perpetual and Periodic Inventory Systems
- FIFO, LIFO and the Weighted Average Cost Method

For more free questions check out our page of

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