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 [2011/03/04 16:16 (13 years ago)] – created cliff | faq:price_code_calculations_how_does_the_markup_calculation_work_margin_retail_tab [2011/09/01 14:37 (13 years ago)] (current) – tanya | ||
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====== How do the calculations on the retail tab work ====== | ====== How do the calculations on the retail tab work ====== | ||
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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 is takes the cost and adds the markup. 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 | + | 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 |
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==== Calculation ==== | ==== Calculation ==== | ||
< | < | ||
COST + (COST x (Percentage)) | COST + (COST x (Percentage)) | ||
</ | </ | ||
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==== Example 1 ==== | ==== Example 1 ==== | ||
- | Where COST = 100 | + | * Where COST = 100 |
- | Where Markup = 100 | + | |
< | < | ||
- | COST + (COST x (Percentage)) = | + | COST + (COST x (Markup |
100 + (100 x 100%) = | 100 + (100 x 100%) = | ||
100 + (100 x 1) = | 100 + (100 x 1) = | ||
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</ | </ | ||
- | ==== Example | + | |
- | Where COST = 100 | + | |
- | Where Markup = 100 | + | |
+ | ==== Example | ||
+ | | ||
+ | | ||
< | < | ||
- | COST + (COST x (Percentage)) = | + | COST + (COST x (Markup |
- | 100 + (100 x 100%) = | + | 100 + (100 x 150%) = |
- | 100 + (100 x 1) = | + | 100 + (100 x 1.5) = |
- | 100 + (100) = | + | 100 + (150) = |
- | 200 | + | 250 |
</ | </ | ||
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+ | ==== 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. | ||
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+ | 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 ===== | ||
+ | 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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+ | ==== Calculation ==== | ||
+ | < | ||
+ | Gross margin = (Revenue - Cost of goods sold) / Revenue | ||
+ | </ | ||
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+ | ===== Example 1 ===== | ||
+ | * Where COST = 100 | ||
+ | * Where Margin Percentage = 50 | ||
+ | |||
+ | < | ||
+ | Gross margin = (Revenue - Cost of goods sold) / Revenue | ||
+ | |||
+ | 200-100/200 = .50 | ||
+ | </ | ||
+ | |||
+ | |||
+ | |||
+ | ===== Example 2 ===== | ||
+ | * Where COST = 100 | ||
+ | * Where Margin Percentage = 60 | ||
+ | |||
+ | < | ||
+ | Gross margin = (Revenue - Cost of goods sold) / Revenue | ||
+ | |||
+ | 250-100 / 250 = .60 | ||
+ | |||
+ | </ | ||
+ | |||
faq/price_code_calculations_how_does_the_markup_calculation_work_margin_retail_tab.1299284164.txt.gz · Last modified: 2011/03/04 16:16 (13 years ago) (external edit)