faq:price_code_calculations_how_does_the_markup_calculation_work_margin_retail_tab

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faq:price_code_calculations_how_does_the_markup_calculation_work_margin_retail_tab [2011/09/01 14:31] tanya |
faq:price_code_calculations_how_does_the_markup_calculation_work_margin_retail_tab [2011/09/01 14:37] tanya |
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===== Markup Calculations ===== | ===== Markup Calculations ===== | ||

- | A markup calculation is a calculation that does its math from "the bottom up". This means that it refers to the dollar value increase as a percentage of cost. The 2 codes that use the markup calculation style are W and L. The cost used is different for each one. W uses base cost, and L uses actual costs otherwize known as the landed cost. | + | A markup calculation is a calculation that does its math from "the bottom up". This means that it refers to the dollar value increase as a percentage of cost. The 2 codes that use the markup calculation style are W and L. The cost used is different for each one. W uses base cost, and L uses actual costs otherwise known as the landed cost. |

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- | ==== Explenation ==== | + | ==== Explanation ==== |

The 100% markup scenario is a great example because most retailers know that a 100% markup is double the price. You can think of the calculation of markup as a way to compare the cost to the increase in terms of a percentage. | The 100% markup scenario is a great example because most retailers know that a 100% markup is double the price. You can think of the calculation of markup as a way to compare the cost to the increase in terms of a percentage. | ||

- | A common mistake in the calculation can happen if you are used to thinking about things in terms of percentage of cost. if I have a cost of $100 and a price of $300 it is intuative to say that the price is cost x 300%. The problem with that is that the markup is only 200%. Test it using the formula above. Please look at our price code X for this type of calculation. | + | A common mistake in the calculation can happen if you are used to thinking about things in terms of percentage of cost. if I have a cost of $100 and a price of $300 it is intuitive to say that the price is cost x 300%. The problem with that is that the markup is only 200%. Test it using the formula above. Please look at our price code X for this type of calculation. |

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===== Margin Calculations ===== | ===== Margin Calculations ===== | ||

- | A margin calculation is a calculation that does its math from “the top down”. This means that it refers to the dollar value increase as a percentage of retail. The 2 codes that use the margin calculation style are H and M. The cost used is different for each one. H uses base cost, and M uses actual costs otherwize known as the landed cost. | + | A margin calculation is a calculation that does its math from “the top down”. This means that it refers to the dollar value increase as a percentage of retail. The 2 codes that use the margin calculation style are H and M. The cost used is different for each one. H uses base cost, and M uses actual costs otherwise known as the landed cost. |

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Gross margin = (Revenue - Cost of goods sold) / Revenue | Gross margin = (Revenue - Cost of goods sold) / Revenue | ||

</code> | </code> | ||

+ | |||

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===== Example 1 ===== | ===== Example 1 ===== | ||

- | * Where COST = 125 | + | * Where COST = 100 |

* Where Margin Percentage = 50 | * Where Margin Percentage = 50 | ||

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Gross margin = (Revenue - Cost of goods sold) / Revenue | Gross margin = (Revenue - Cost of goods sold) / Revenue | ||

- | 250-125/250 = .50 | + | 200-100/200 = .50 |

</code> | </code> | ||

faq/price_code_calculations_how_does_the_markup_calculation_work_margin_retail_tab.txt · Last modified: 2011/09/01 14:37 by tanya