7. Using mark-up/margin percentages to establish cost

Question 1

What is the difference between margin and mark-up?

Answer 1

Mark-up is calculated on cost.
Margin is calculated on sales.

Question 2

If inventory costs £120, what would be the sales price if:
Margin is 40%
Markup is 40%

Answer 2

If margin is 40%:
Sales price = £120 x 100/60 = £200, and the profit is £120 x 40/60 = £80

If markup is 40%
Sales price = £120 x 1.4 = £168