Formula for Markup from COGs

[infotokevin]

Units <tbody> </tbody>	COGs (each) <tbody> </tbody>	Total COGs <tbody> </tbody>	Desired Margin <tbody> </tbody>	Revenue (sell price) = COG/(1-m) <tbody> </tbody>	Markup in percentage (?) <tbody> </tbody>
1,000 <tbody> </tbody>	5.00 <tbody> </tbody>	5,000.00 <tbody> </tbody>	40% <tbody> </tbody>	8,333 <tbody> </tbody>	what is the formula to determine what the markup would be to get a 40% margin?

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The reverse would be; I would enter this markup to give me the 40% margin...

This may be obvious - I have been looking at this so long now I don't even know what month it is any more.... arrrrrgggghhh

Thanks up front for the assistance -

 

[shg]

The formula is described in your post -- sell price =COGS/(1-Margin)

=5000/(1-40%) returns 8333.33

 

[jsotola]

COG purchase price * 140% = COG selling price

 

[shg]

Sorry, I answered the wrong question. The markup of COGS to achieve a margin of 40% is

=1/(1-40%) - 1 ~ 0.667

 

[infotokevin]

Ah yes - this looks correct. I really appreciate the formula. In this example it works and makes sense - markup of .6666 works out to 40% margin.

I thank you and my battered and bruised brain thanks you as well...

Sorry, I answered the wrong question. The markup of COGS to achieve a margin of 40% is

=1/(1-40%) - 1 ~ 0.667

 

[infotokevin]

Ah yes - this looks correct. I really appreciate the formula. In this example it works and makes sense - markup of .6666 works out to 40% margin.

I thank you and my battered and bruised brain thanks you as well...

Oh no - something does not seem correct.

If I have COGs @ 5000 and with 40% margin have 8333 as sell price (revenue), then in your formula, which numbers represent the "1"?

=1 (?)/1(?)-40%) - 1 (?)

Thank you again...

 

[shg]

The 1 doesn't represent anything -- it just falls out of the algebra:

cogs + margin * sell = sell

therefore cogs = sell - margin * sell = sell * (1-margin)

So sell = cogs / (1 - margin)

Also,

sell = cogs * (1 + markup)

And from above,

sell = cogs / (1 - margin)

so cogs * (1 + markup) = cogs / (1 - margin)

therefore 1 + markup = 1 / (1 - margin)

So markup = 1 / (1 - margin) - 1

COGS and Sell are dollar amounts, margin and markup are percentages.