Retail Margin And Markup TableThis table is designed to assist in converting the different methods of arriving at a retail price. Use the multiplier on cost to achieve the desired margin. For example, to achieve a 33.33% margin use a 150% (1.50) multiplier. Another way to express the difference is that a markup percentage of 50% only yields a margin percentage of 33.33%. Markup, defined as the percentage added to cost to arrive at a selling price, is commonly used to price materials. If you want to mark up an item 20%, you add 20% of the item's cost to the cost. However, as we have demonstrated, a 50% markup does NOT yield a 50% margin! It is important that you utilize margin and markup properly. Here are the formulae that should help: Margin If the cost for an item is $500 and you want a 30% margin: $500 / (100%-30%) $500 / (70%) $500 / .70 = $714.29 COST / (100%-GM%) = SELLING PRICE A variation taught by many accountants is to also include what is known as base overhead factor (BOF). That ranges from 1.25% to 5%. The same margin with the BOF method, in this case 5%, would be as follows: $500 / (100%-30%-5%) $500 / (65%) $500 / .65 = $769.23 COST / (100%-GM%-BOF%) = SELLING PRICE In the Margin example above, do NOT make the common error of multiplying by .70! In this case that would yield a selling price of $850.00; nice if you can get it honestly but the greatest probability is that a competitor would undercut your bid at the same (anticipated) margin! Markup If an item cost $500 and you want to add a 20% markup: 500 X 20% = $10 $500 + $100 = $600 SELLING PRICE The actual margin on this item is less than 20%. ($600 - 500) / $600 = 16.67% (RETAIL - COST) / RETAIL
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