Is there a difference? Absolutely. Markup and gross profit percentage are not the same! Also, the accounting for gross profit vs mark-up are different! A clear understanding and application of the two within a pricing model can have a drastic impact on the bottom line. Terminology speaking, markup percentage is the percentage difference between the actual cost and the selling price, while gross proft percentage is the percentage difference between the selling price and the profit.
In Short and How To Calculate
Example:
- Item costs R100.00 and sells for R150.00.
- Markup is R50 or 50% of the cost.
- Gross profit is R50 but 33% of the selling price.
How to calculate:
- Markup % = (Selling price – cost price) / cost price x 100
- Gross profit % = (Selling price – cost price) / selling price x 100
Gross Profit vs Markup Chart
- 15% Markup = 13.0% Gross Profit
- 20% Markup = 16.7% Gross Profit
- 25% Markup = 20.0% Gross Profit
- 30% Markup = 23.0% Gross Profit
- 33.3% Markup = 25.0% Gross Profit
- 40% Markup = 28.6% Gross Profit
- 43% Markup = 30.0% Gross Profit
- 50% Markup = 33.0% Gross Profit
- 75% Markup = 42.9% Gross Profit
- 100% Markup = 50.0% Gross Profit
The Beancounter offers outsourced accounting and tax services and can custom make a package according to your own requirements. Get in contact with us today, and make 2012 a great year for you and your business.
