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faq:price_code_calculations_how_does_the_markup_calculation_work_margin_retail_tab [2011/03/04 16:17 (13 years ago)] clifffaq: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 ======
 +
 ===== 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 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. 
 + 
 ==== Calculation ==== ==== Calculation ====
 <code> <code>
 COST + (COST x (Percentage)) COST + (COST x (Percentage))
 </code> </code>
 +
 +
 ==== Example 1 ==== ==== Example 1 ====
-Where COST = 100 +  * Where COST = 100 
-Where Markup = 100+  Where Markup Percentage = 100
  
 <code> <code>
-COST + (COST x (Percentage)) =+COST + (COST x (Markup Percentage)) =
 100 + (100 x 100%) = 100 + (100 x 100%) =
 100 + (100 x 1) =  100 + (100 x 1) = 
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 200 200
 </code> </code>
 +
 +
  
  
 ==== Example 2 ==== ==== Example 2 ====
-Where COST = 100 +  * Where COST = 100 
-Where Markup = 150+  Where Markup Percentage = 150
  
 <code> <code>
-COST + (COST x (Percentage)) =+COST + (COST x (Markup Percentage)) =
 100 + (100 x 150%) = 100 + (100 x 150%) =
 100 + (100 x 1.5) =  100 + (100 x 1.5) = 
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 250 250
 </code> </code>
 +
 +
 +
 +
 +
 +==== 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.
 +
 +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.
 +
 +
 +
 +
 +
 +===== 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. 
 +
 +
 +
 +
 +
 +
 +==== Calculation ====
 +<code>
 +Gross margin = (Revenue - Cost of goods sold) / Revenue
 +</code>
 +
 +
 +
 +
 +
 +
 +
 +
 +===== Example 1 =====
 +  * Where COST = 100
 +  * Where Margin Percentage = 50
 +
 +<code>
 +Gross margin = (Revenue - Cost of goods sold) / Revenue
 +
 +200-100/200 = .50
 +</code>
 +
 +
 +
 +===== Example 2 =====
 +  * Where COST = 100
 +  * Where Margin Percentage = 60
 +
 +<code>
 +Gross margin = (Revenue - Cost of goods sold) / Revenue
 +
 +250-100 / 250 = .60
 +
 +</code>
 +
  
faq/price_code_calculations_how_does_the_markup_calculation_work_margin_retail_tab.1299284223.txt.gz · Last modified: 2011/03/04 16:17 (13 years ago) by cliff