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1%
%
Difference Between % Gross Profit Margin (%GPM) and % Markup (%M)
Recall:
Markup (M) represents gross profit. Gross profit is the same as gross profit margin.
Markup = Operating Expenses + Operating (Net) Profit
OR Markup = Selling Price – Cost of Goods Sold
% Gross Profit Margin (%GPM)
Markup represented as a percentage of the selling price is called the % Gross Profit Margin.
% 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 = 012345 (0)
89::;<= >2;?9 (8>)×100
% Markup (%M)
Markup represented as a percentage of the cost is called the % Markup.
% 𝑀𝑎𝑟𝑘𝑢𝑝 = 012345 (0)
FGHI (F) ×100
Recall from last class:
Conversion Formula for converting from % markup based on cost to % markup based on selling price:
Conversion Formula for converting from % markup based on selling price to % markup based on cost:
Example: If I want a gross profit margin of 25%, what percent should I mark up my product?
%M =KL%
MNN%OKL% ×100 =33.33%
% 𝑀𝑎𝑟𝑘𝑢𝑝 𝑜𝑛 𝐶𝑜𝑠𝑡 (%𝑀) =
% 𝑀𝑎𝑟𝑘𝑢𝑝 𝑜𝑛 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒
100% − % 𝑀𝑎𝑟𝑘𝑢𝑝 𝑜𝑛 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 ×100%
%
% 𝑀𝑎𝑟𝑘𝑢𝑝 𝑜𝑛 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 (%𝐺𝑃𝑀) =
% 𝑀𝑎𝑟𝑘𝑢𝑝 𝑜𝑛 𝐶𝑜𝑠𝑡
100%
+ % 𝑀𝑎𝑟𝑘𝑢𝑝 𝑜𝑛 𝐶𝑜𝑠𝑡 ×100%
%
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Recall: Cost Oriented Pricing Strategy – Standard Markup Pricing
a) Setting the regular Selling Price (SP)
C + M = SP
b) Calculating the Reduced Selling Price (RSP) or Discounted Price
SP – MD = RSP
c) Calculating the Break-Even Price (BE)
• Add costs (COGS) and operating expenses: C + OE = BE Price
