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Posted: 7/25/2013 11:11:02 AM EST
So you have $1.00 and want to mark it up 20% how much would you charge the customer?
Link Posted: 7/25/2013 11:12:28 AM EST

.20
Link Posted: 7/25/2013 11:13:08 AM EST
87 cents
Link Posted: 7/25/2013 11:13:18 AM EST
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Originally Posted By 9mmRandy:

.20
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Math fail. Marking up would be adding 20%, so $1.20.
Link Posted: 7/25/2013 11:14:37 AM EST
[Last Edit: 7/25/2013 11:15:52 AM EST by graysonp]
Link Posted: 7/25/2013 11:14:38 AM EST
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Originally Posted By 9mmRandy:

.20
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So you have a $1000 gun you will sell to me for $200...
What a swell guy.
Link Posted: 7/25/2013 11:15:00 AM EST
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Originally Posted By Strongbow:


Math fail. Marking up would be adding 20%, so $1.20.
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Originally Posted By Strongbow:
Originally Posted By 9mmRandy:

.20


Math fail. Marking up would be adding 20%, so $1.20.

I'm sure thats what he meant. It's a .20 markup over $1.00
Link Posted: 7/25/2013 11:15:04 AM EST
Link Posted: 7/25/2013 11:15:35 AM EST
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Originally Posted By graysonp:
$1.25

The traditional way to calculate profit margin is as a percentage of the retail price. Margin = Net Profit / Revenue.

Some businesses will just mark up 20% from the wholesale cost (giving you $1.20), but that's not the correct way to do it.

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Winner!!!
Link Posted: 7/25/2013 11:16:50 AM EST
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Originally Posted By Strongbow:


Math fail. Marking up would be adding 20%, so $1.20.
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Originally Posted By Strongbow:
Originally Posted By 9mmRandy:

.20


Math fail. Marking up would be adding 20%, so $1.20.


I know the math. He said I "have" the dollar and want to make 20%. If I collect .20 I have made 20% on what I have.

I'm guessing it is/was some kind of trick question?

Link Posted: 7/25/2013 11:17:32 AM EST
Originally Posted By BR7908:
So you have $1.00 and want to mark it up 20% how much would you charge the customer?
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$1.00 / .8 = $1.25 selling price This gives you a 20% profit margin.
Link Posted: 7/25/2013 11:17:42 AM EST
LOL so helping with summer school are we
Link Posted: 7/25/2013 11:17:57 AM EST
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Originally Posted By Natron11:

So you have a $1000 gun you will sell to me for $200...
What a swell guy.
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Originally Posted By Natron11:
Originally Posted By 9mmRandy:

.20

So you have a $1000 gun you will sell to me for $200...
What a swell guy.


I'll make up for it in volume
Link Posted: 7/25/2013 11:18:31 AM EST
[Last Edit: 7/25/2013 11:23:29 AM EST by Fugitive]
There is a huge difference between markup and profit margin. For instance: $1.00 marked up 30 percent is $1.30. $1.00 with a 30% profit margin attached is $1.43. That is actually a 43% markup. Cost divided by profit margin is the formula you want if you trying to make a reasonable profit margin.

ETA: Typed that out too fast. Its cost/ reciprocal of profit margin. Ie: $100/.70=$1.43 giving you 30% profit margin.
Link Posted: 7/25/2013 11:19:14 AM EST
[Last Edit: 7/25/2013 11:21:09 AM EST by BR7908]
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Originally Posted By 9mmRandy:


I know the math. He said I "have" the dollar and want to make 20%. If I collect .20 I have made 20% on what I have.

I'm guessing it is/was some kind of trick question?

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Originally Posted By 9mmRandy:
Originally Posted By Strongbow:
Originally Posted By 9mmRandy:

.20


Math fail. Marking up would be adding 20%, so $1.20.


I know the math. He said I "have" the dollar and want to make 20%. If I collect .20 I have made 20% on what I have.

I'm guessing it is/was some kind of trick question?



To make a 20% profit margin you would charge $1.25

Eta correct wording

Link Posted: 7/25/2013 11:22:17 AM EST
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Originally Posted By NotAFudd:
LOL so helping with summer school are we
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No, teaching a new employee proper was of calculating profit
Link Posted: 7/25/2013 11:22:23 AM EST
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Originally Posted By BR7908:
Eta correct wording

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hehe you're fast
Link Posted: 7/25/2013 11:23:26 AM EST
[Last Edit: 7/25/2013 11:24:14 AM EST by Interceptor_Knight]
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Originally Posted By Fugitive:
There is a huge difference between markup and profit margin. For instance: $1.00 marked up 30 percent is $1.30. $1.00 with a 30% profit margin attached is $1.43. That is actually a 43% markup. Cost divided by profit margin is the formula you want if you trying to make a reasonable profit margin.
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You do not divide $1.00 by .3, you divide it by .7 to get your $1.43 with a 30% profit margin.
$1.00 / .3 = $3.33
Link Posted: 7/25/2013 11:24:34 AM EST
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Originally Posted By Interceptor_Knight:


You do not divide $1.00 by .3, you divide it by .7 to get your $1.43.
$1.00 / .3 = $3.33
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Originally Posted By Interceptor_Knight:
Originally Posted By Fugitive:
There is a huge difference between markup and profit margin. For instance: $1.00 marked up 30 percent is $1.30. $1.00 with a 30% profit margin attached is $1.43. That is actually a 43% markup. Cost divided by profit margin is the formula you want if you trying to make a reasonable profit margin.


You do not divide $1.00 by .3, you divide it by .7 to get your $1.43.
$1.00 / .3 = $3.33

Yeah. Caught it right after I hit submit. See edit.
Link Posted: 7/25/2013 11:32:00 AM EST
Marking up the cost of an item 100% gives you a 50% gross profit margin on SALES. It also gives you a gross 100 % return on investment.
Link Posted: 7/25/2013 11:34:21 AM EST
Markup and margin are not the same.

Margin is the percentage of the selling price that is profit.

Divide cost by 1 minus desired margin to get a selling price for said margin.

1/(1-.20) = $1.25 (sell for $1.25, make 20% - $0.25)
Link Posted: 7/25/2013 11:41:53 AM EST
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Originally Posted By TerribleTom:
Markup and margin are not the same.

Margin is the percentage of the selling price that is profit.

Divide cost by 1 minus desired margin to get a selling price for said margin.

1/(1-.20) = $1.25 (sell for $1.25, make 20% - $0.25)
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Correct. I might have worded it wrong but you explained it correct.
Link Posted: 7/25/2013 11:42:02 AM EST
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Originally Posted By graysonp:
$1.25

The traditional way to calculate profit margin is as a percentage of the retail price. Margin = Net Profit / Revenue.

.20 = .25 / 1.25

Some businesses will just mark up 20% from the wholesale cost (giving you $1.20), but that's not the correct way to do it, at least according to traditional accounting/marketing terms.

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What you are clarifying is the difference between "mark-up" and "margin."
Link Posted: 7/25/2013 11:50:06 AM EST
Mark "IT" up = .25
Markup = .20

With a cost of 1.00 and a sales price of $1.25
Link Posted: 7/25/2013 11:54:05 AM EST
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Originally Posted By Averagebear:
Mark "IT" up = .25
Markup = .20

With a cost of 1.00 and a sales price of $1.25
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Is this a universal understanding of the terms mentioned? If so that's a simple way to word it.
Link Posted: 7/25/2013 12:04:31 PM EST
Link Posted: 7/25/2013 12:20:53 PM EST
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Originally Posted By 9mmRandy:


I know the math. He said I "have" the dollar and want to make 20%. If I collect .20 I have made 20% on what I have.

I'm guessing it is/was some kind of trick question?

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Originally Posted By 9mmRandy:
Originally Posted By Strongbow:
Originally Posted By 9mmRandy:

.20


Math fail. Marking up would be adding 20%, so $1.20.


I know the math. He said I "have" the dollar and want to make 20%. If I collect .20 I have made 20% on what I have.

I'm guessing it is/was some kind of trick question?



Not a trick question. It is the difference between the terms "markup" and "margin".
If you collect .20 you have NOT made a 20% margin. You have to sell your dollar item for $1.25 to make a 20% profit margin. Margin is the percentage of the selling price that is profit and $.25 is 20% of $1.25. If you sell that same dollar item for $1.50 then you have made a 33-1/3% margin or if you can sell it for $2.00 you make a 50% margin because that $1.00 in profit is 50% of the $2.00 selling price.

Posted Via AR15.Com Mobile
Link Posted: 7/25/2013 12:33:56 PM EST
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Originally Posted By graysonp:


In my experience, no. Those who have taken business or accounting classes, and most people who have run/managed a business will know the distinction. But for the average person, the terms "profit margin", "marking it up", etc are all interchangeable for "markup", and most people will answer $1.20 to the OP.
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Originally Posted By graysonp:
Originally Posted By BR7908:
Originally Posted By Averagebear:
Mark "IT" up = .25
Markup = .20

With a cost of 1.00 and a sales price of $1.25


Is this a universal understanding of the terms mentioned? If so that's a simple way to word it.


In my experience, no. Those who have taken business or accounting classes, and most people who have run/managed a business will know the distinction. But for the average person, the terms "profit margin", "marking it up", etc are all interchangeable for "markup", and most people will answer $1.20 to the OP.


Nope. Those people should have paid closer attention in class. Markup does not equal margin. I'll take a 50% margin over a 50% markup any time. 50% margin means I doubled my money. 50% markup means just that - marked up 50% ovee cost.

Posted Via AR15.Com Mobile
Link Posted: 7/25/2013 12:37:11 PM EST
[Last Edit: 7/25/2013 12:39:05 PM EST by madmike66]
Profit does not equal markup. Profit is simply that...profit, the amount you take away after all other costs and expenses.

So the answer is, it totally depends on your business. If you have a dollar (the product), and you have a store that you sell it in, with a sales staff, and electric bills, etc etc etc, you have to build a portion of those business costs into your markup. Let's say those overhead and administrative costs amount to a 40 cent markup. Your cost of the product is now $1.40.

Had you sold that dollar for $1.20...you actually lose 20 cents. If you sell it for $1.40, you break even and earn no profit. If your desire is to bring home 20% profit in that scenario, then you must charge $1.68. or $1.40 x 1.2

So again, how you calculate profit depends entirely on your business costs and how your business is structured.
You're welcome.
Link Posted: 7/25/2013 1:22:20 PM EST
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Originally Posted By madmike66:
Profit does not equal markup. Profit is simply that...profit, the amount you take away after all other costs and expenses.

So the answer is, it totally depends on your business. If you have a dollar (the product), and you have a store that you sell it in, with a sales staff, and electric bills, etc etc etc, you have to build a portion of those business costs into your markup. Let's say those overhead and administrative costs amount to a 40 cent markup. Your cost of the product is now $1.40.

Had you sold that dollar for $1.20...you actually lose 20 cents. If you sell it for $1.40, you break even and earn no profit. If your desire is to bring home 20% profit in that scenario, then you must charge $1.68. or $1.40 x 1.2

So again, how you calculate profit depends entirely on your business costs and how your business is structured.
You're welcome.
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Are you unfamiliar with the differentiation between the concepts of "gross profit" (typically the difference between selling price and cost of goods, possibly cost of goods + inbound freight) and "net profit" which takes into account other expenses (like your example above)?
Link Posted: 7/25/2013 1:33:04 PM EST
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Originally Posted By Interceptor_Knight:

$1.00 / .8 = $1.25 selling price This gives you a 20% profit margin.
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Originally Posted By Interceptor_Knight:
Originally Posted By BR7908:
So you have $1.00 and want to mark it up 20% how much would you charge the customer?

$1.00 / .8 = $1.25 selling price This gives you a 20% profit margin.

this is how we do it in the parts store
Link Posted: 7/25/2013 2:51:54 PM EST
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Originally Posted By zaxpowerwagon:

this is how we do it in the parts store
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Originally Posted By zaxpowerwagon:
Originally Posted By Interceptor_Knight:
Originally Posted By BR7908:
So you have $1.00 and want to mark it up 20% how much would you charge the customer?

$1.00 / .8 = $1.25 selling price This gives you a 20% profit margin.

this is how we do it in the parts store



This is how we do it as well
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