Mark up/gross margin formula required please?

[mahmed1]

I want to work of a 50% Gross/profit margin.

I dont want to mark up by 50%. i want to mark up each item based on 50% GROSS PROFIT.

so basically if i want to make 50% gross profit on £1.00,2.30 3.30 (Items bought at cost price) i would need to sell the product at ???? which is a mark up percentage of ????.

What formula can i use

Thanks

 

[xlHammer]

Divide your cost by 1-GP%

eg. Cost = £5, Gross Profit % = 50%

£5/(1-50%) = £5/(1-0.5) = £5/(0.5) = £10 = selling price

Gross profit is therefore £10 - £5 = £5

£5 as a % of £10 = 50%

I cell A1 contains your £5 and cell A2 contains 50% (actually 0.5 formatted as a percentage) then your formula for selling price is;

=A1/(1-A2)

Any help?

 

[mahmed1]

Divide your cost by 1-GP%

eg. Cost = £5, Gross Profit % = 50%

£5/(1-50%) = £5/(1-0.5) = £5/(0.5) = £10 = selling price

Gross profit is therefore £10 - £5 = £5

£5 as a % of £10 = 50%

I cell A1 contains your £5 and cell A2 contains 50% (actually 0.5 formatted as a percentage) then your formula for selling price is;

=A1/(1-A2)


Any help?

Thank you

So if i wanted to know based on your example what the percentage of markup is, is that the same as Gross margin i.e 50%.

If its different, what's the difference between mark up and gross profit/margin?

Thank you for your help

 

[xlHammer]

% mark up would be the gross profit as a % of the original cost,

£5 GP as a % of £5 cost = 100% mark up

as a function of the Gross Profit % (margin);

=1/(1-GP%) - 1

in the example;

=1/(1-0.5) - 1 = 2 - 1 = 1 or 100%

as a formula;

=1/(1-A2)-1

 

[Nalani]

If its different, what's the difference between mark up and gross profit/margin?

This might give you a visual of the difference, with Profit and Overhead thrown in. (surely you have Overhead)

Excel Workbook
	A	B	C	D	E	F	G
1	COST OF ITEM				5.00		Overhead
2	COST		50.00%	5.00			15.00%
3	GROSS MARGIN		50.00%	5.00
4	OVERHEAD		15.00%	1.50			Markup
5	PROFIT		35.00%	3.50			85.00%
6	SUBTOTAL				5.00
7	MARKUP		85.00%		4.25
8	FINAL PRICE				10.00
Sheet1

Change the values in G2 and/or G5 and see how it changes things for you.

 

[mahmed1]

% mark up would be the gross profit as a % of the original cost,

£5 GP as a % of £5 cost = 100% mark up

as a function of the Gross Profit % (margin);

=1/(1-GP%) - 1

in the example;

=1/(1-0.5) - 1 = 2 - 1 = 1 or 100%

as a formula;

=1/(1-A2)-1

Thank you

i have understood the main formula however im not still sure why do we do 1/(1-0.05)? our original price is £5?

 

[Camo's Excel]

For any readers still needing help in markup/margin to margin/markup conversions here is a simple tool..............................
https://dl.dropboxusercontent.com/u/80607238/Margin and Markup Conversion Tool.xls

It is an excel margin to markup conversion calculator that answers a few questions...................... Enjoy.