Account Keeping Plus – Administration, Bookkeeping, Compliance News & Tips MYOB Reckon Quickbooks Xero Software TrainingSmall Business

Making Business Books and Accounting Come Alive! MYOB Reckon Xero

Business Finance 101 – Understand the difference between Mark-Ups and Margins when Pricing

Leave a comment


Business Finance 101 – Understand the difference between Mark-Ups and Margins when Pricing

Understand the difference between Mark-Ups and Margins when Pricing

It is common to not understand the difference between Mark-ups and Margins when it comes to pricing. This is part of the costing of goods and services, and either is not quite the same as the other.

We usually start with a cost price of the quantities for materials and labour, let’s say $1000.

If we Mark-up we add on top to the cost – let’s say 30%, then $300 is added and the sell price is $1300.

But the $300 compared to the Final Price is 23% of $1300, ((300/1300)X100). This is the Margin.

So if the Margin target is 30%, just adding 30% to the cost is incorrect.

To get 30% Margin on $1300 sell price is $390 (30% is 0.3 times $1300 gives $390). And the $390 from $1300 leaves $910 cost price to buy the goods.

And $390 is 42.8% Mark-up of $910. So if costs are $910 the calculation to achieve 30% margin is $910 x 1.428 = $1299.48, round up to $1300.

Many businesses wonder why they don’t get the profit they expect, and sometimes this is the reason. So check your figures and see if your Margins and Mark-ups are what you were expecting, and understand the difference between them!

Need help? Not sure? Call for FREE 30min advice / strategy session today! 0407 361 596 Aust

***BEFORE you BUY Ask us for a competitive software price BELOW retail – no obligation!

You also get FREE 30 min to assist in setting up your company in the software, and FREE ongoing email or phone support – No-one offers as much! Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email info@accountkeepingplus.com.au or call 0407 361 596 Australia

Advertisements

Author: accountkeepingplus

Administration, bookkeeping and compliance for small business, Training, trouble-shooting, or we can do the books and payroll for you! Self Managed Superannuation Fund Service Provider, free support MYOB Certified Consultant, Reckon/QuickBooks Professional Partner.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s