Mark-up & Margin

• Mark-up is always calculated based on the cost of sales. It can be helpful to remember that mark-up puts the profit on top of the cost. When using mark-up the cost of sales figure always represents 100%.
• Margin is always calculated on the sales figures. To remember this, think of the margin being included in the sales price.
• When calculating mark-up and margin, you need to understand that the figure you're calculating is actually the gross profit.
• The gross profit is the difference between the sales and the cost to buy, or make, the product, or providing a service.
• Opening inventory

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  This is the inventory that we have in our stores at the beginning of the financial year.
• Purchases

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  This is the cost of the purchases we made during the financial year. This figure is added to the opening inventory.
• Less purchases returns

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  This is the cost of purchases we returned to the supplier during the financial year. This figure is deducted from the opening inventory and purchases calculation.
• Less closing inventory

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  This is the cost of our closing inventory at the end of the financial year. This figure is deducted from our opening inventory, purchases and purchases returns calculation.
• Cost of sales

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  Once you have calculated your opening inventory + purchases - purchases returns - closing inventory, this becomes your cost of sales and this figure tells us what it cost to buy in, or make, the product.