Margin v Markup???

Superbar

Hi,

Can somebody please tell me the difference here. If i was a distributor for example and the retailer i am selling a product to tells me he requires 40% margin then what price do i sell to him at if the product RRP is €100.00 ex vat?

Then what if he says he requires 40% markup, what price do i sell to him at if the RRP again is €100.00 ex vat?

Thanks for your help

Alan Shore

The gross profit margin is the profit someone will have after paying for the goods.

So if he wants 40% that means that he wants 40% of the ex VAT sales price after paying for the product.

In order to achieve this margin he has to mark up the cost price.

He would have to mark up the item by 66% to get a margin of 40%.

If he marked it up 40% then the margin is about 28%.

Marcusm

For a 40% margin on a €100 (ex VAT) retail price, the wholesale price would have to be €60 per unit [(selling price) * (1-0.4)]

For a 40% mark up on a €100 (ex VAT) retail price, the wholesale price would have to be €71.42 per unit [(selling price) / (1+0.4)]