Mark-up & Gross Profit Percentage
Mark-up is the amount you add to the cost to get the retail price. Let's say that you mark up an item for which you pay $3.00 by 50%. Convert the percentage to a the decimal form 0.50 and multiply $3.00 by 1.50 to get $4.50. Your mark-up is 50% because you increased the cost by 50% to get the retail price.
Following through with the same example, now we look at this in reverse. When you sell the item for $4.50 with a cost of $3.00, then you have a profit of $1.50 on a sale of $4.50. The gross profit percentage is 1.50/4.50 = 0.33 or 33%.
When you have the item, know what gross profit percentage you want, know the cost, this is the procedure to find the mark-up percentage.
Or, use this worksheet:
Expressed algebraically, where "M" is the multiplier and "G" is the gross profit percentage desired, then:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M = 1/(1-G)
This is a chart of the most commonly used mark-up percentages. To mark something up 50% remember that you multiply it by 150%. To mark something up 200%, you multiply it by 300%.
A markup of... |
will give you a gross profit percentage of... |
25%
|
20% |
33%
|
25% |
40%
|
28% |
50%
|
33% |
75%
|
43% |
100%
|
50% |
150%
|
60% |
200%
|
67% |
300%
|
75% |