###### Concept and Calculation of Mark Up

Accounting (Year 12) - Cost Accounting

Christian Bien

**What is Mark-Up?**

Markup is the percentage or amount added to the price or quote in the production of goods or services to cover costs and produce a profit. Businesses have the purpose of producing the largest profit available, without a markup, businesses will be running at breakeven levels producing no profit. In other words, it's the % of gross profit on a sale or providing a service.

For example, if a painter was asked for a quote for a job and the job cost $100 but he quoted the customer $110, then the markup would be 10% or $10.

**Calculation of a Mark-Up**

To calculate a markup simply multiply the cost of manufacturing a product or delivery of a service by the percentage amount.

The formula for Mark Up

Mark Up Price = Cost of Unit Production * (1 + Markup Percentage)

**Example 1**: If a job cost $150. A 20% markup would be: = $150 * 1.20 = $180**Example 2**: If a job cost $200 A 15 % markup would be: = $200 * 1.15 = $230**Example 3**: If a job cost $500 A 45% markup would be: =$500 *1.45 =$725

**Finding the Percentage of Mark-Up**

While this is unlikely to show up in a test or exam, to find the percentage markup remember: (New -Old)/Old * 100

**Example 1**: If a quote was $725 and the cost of the job is $500. The markup would be: = (725-500)/500 *100 =225/500 *100 = 0.45 *100 =45%**Example 2**: If a quote was $800 and the cost of the job is $600 The markup would be: =(800-600)/600 *100 =200/600 *100 =0.33 *100 =33%