Cost Price, Sales Price, Mark-Up

Q: How do you find the cost price if the sales are $216,000 and the mark-up is 50%?


A:
"Mark-up" literally means the amount you "mark up" the cost by (the amount you increase it by) to get to the selling price. The percentage (50%) is based on the cost - i.e. the profit (mark-up) is 50% of the cost price.

Cost Price Sales PriceIn an equation this simplifies to:

Mark-up (profit) / cost = 50/100 (50% of cost)

Selling price = cost + profit (mark-up)
Selling price = 100%+50%
Selling price = 150%

Therefore cost = 100/150 X $216,000 = $144,000

Hope that helps understand the differences between cost price, sales price and mark-up.

Best,

Comments for Cost Price, Sales Price, Mark-Up

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Loss
by: EmoLover

If an article is sold at a loss of 25% and was bought for $1250, find the cost price.

Inventory
by: Hassan

Opening stock = 39,700.00
Purchases = 453,000.00
Sales = 551,000.00
Closing balance= ?????????
if markup 30%


To solve this problem you have to know the cost of sales formula and what mark-up percentage means. You may want to check out my lesson on Sales, Cost of Goods Sold and Gross Profit before continuing here.

The cost of goods sold formula:
Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory

Closing Inventory formula:
Closing Inventory = Opening Inventory + Purchases - Cost of Goods Sold

Closing Inventory = 39,700.00 + 453,000.00 - Cost of Goods Sold


But they don't give us cost of goods sold, only the sales.

So we use the sales figure and mark-up to get the cost of goods sold.

Cost of Goods Sold = 100/130 X Sales
= 100/130 X 551,000.00
= 423,846

Closing Inventory = 39,700.00 + 453,000.00 - Cost of Goods Sold

Closing Inventory = 39,700.00 + 453,000.00 - 423,846
= 68,854


Hope that helps understand mark-up, cost of good sold and closing inventory!

Best,

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