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Mark Up Versus Margin

The document defines markup and margin, providing examples to illustrate the difference. Markup refers to the monetary amount of profit, while margin refers to the percentage of profit. For the same profit value, the markup percentage is always higher than the margin percentage. It also discusses how to calculate margin by dividing gross profit by selling price and markup by dividing gross profit by cost. The document then provides an example showing that Deal B, which offers a 20% margin, provides a higher profit than Deal A which offers a 30% markup. Finally, it defines and provides examples for calculating trade discount.

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Caryl Galocgoc
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132 views18 pages

Mark Up Versus Margin

The document defines markup and margin, providing examples to illustrate the difference. Markup refers to the monetary amount of profit, while margin refers to the percentage of profit. For the same profit value, the markup percentage is always higher than the margin percentage. It also discusses how to calculate margin by dividing gross profit by selling price and markup by dividing gross profit by cost. The document then provides an example showing that Deal B, which offers a 20% margin, provides a higher profit than Deal A which offers a 30% markup. Finally, it defines and provides examples for calculating trade discount.

Uploaded by

Caryl Galocgoc
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Mark up Versus Margin

Definition of terms:
• Markup/Margin is the amount of money you make
on a product or service.
• Markup: the amount of money in peso (or any
currency)
• Margin: the percentage in profit
Example:
Markup: You want a 200 peso increase in the original
price.
Margin: You want a margin of 60% to cover the profit
and expenses.
Points to remember:
• For the same value of profit, mark-up
percentage is always higher than the
margin percentage.
• To get the margin, divide gross profit by
the selling price.
• To get mark-up, divide gross profit by
the cost.
Markup vs. Margin
Gross Profit = Selling Price – Cost

25%

For the same value of profit, mark-up


percentage is always higher than the margin
percentage.
A seller wants to offer two deals on a product that
cost P2000 and is sold for P3500. On which deal is the
profit higher?
Deal A: 30% markup or Deal B: 20% margin
•Deal
  A:

Deal B:

Therefore: Deal B offer gives a higher profit!


Markup vs. Margin

• Markup is gross profit as a % of Costs


• Margin is gross profit as a % of Sales
Trade Discount
Definition of Terms:
• A
  trade discount is the amount by which the retail
price of a product is reduced by the manufacturer
when it is sold to the reseller or customer.
Formula:

 List price is the fee for a service or product before


discounts are deducted or sales taxes are added.
 Net price is the final charge you pay for a product
or service after discounts and sales taxes are
computed.
Recall: Percentage-Base-Rate Formulas
Example 1. Mary saved a total of P1,200 after a 15%
discount was given to all her purchases. How much was
her total purchase?

•Solution:
 
Trade discount: P1,200
Discount Rate: 15% or 0.15
Example 2. An air conditioning unit, listed at P36,000
with a discount of P7,200 is offered to a customer.
Determine the discount rate.

•Solution:
 
Original price: P36,000
Discount: P7,200
Example 3. Family Saver’s Supermarket places a P3,500
worth of assorted brands of chocolate. The chocolate
wholesaler gave a 25% discount. How much is the trade
discount?
•  
Solution:
Original price:: P3,500
Discount Rate: 25% or 0.25
Example 4. In a video store, a DVD that sells for P375 is
marked 10% off. What is the trade discount? What is
the sale price of the DVD?

•  
Solution:
Original Price: P375
Discount Rate: 10%
ACTIVITY TIME!
1. Complete the table:
Original Price Trade Discount Discount Rate Discounted
Price

P6,500 P1200

P500 10%

P2,100 P5,600

P28,800 35%
2. What is the cost of a product that is
sold for P31,500 with a margin of 40%?

3. How much is the selling price of a


double-burner gas stove listed at P2,650 if
a discount of 15% is given to the
customer?
4. A beauty salon is celebrating its first
anniversary. They are offering hair
rebonding services for only P699 for the
first 10 customers. After the offer, the
cost of service will be back to P1,699.
What is the estimated discount rate of
the offer?
Stay at Home!
God bless…

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