Margin and Markup Differences and How to Calculate

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Name Email Along with the new businesses that emerge, new managers or at least new management models are also notable. The union of technology and the speed of information – today very common in cloud platforms and applications, allows much more access to management tools and, consequently, the preparation of companies to evaluate their numbers and results. When pricing products, it is common for managers to face numerous doubts, after all, the formation of the sales price depends on aspects such as: demand, competition, supply and market conditions; therefore, this needs to be done correctly and intelligently, as the main objective of most companies is to generate profit. In this context, today we will talk about margin and markup, their differences and how to calculate each one. Margin x Markup It is common for both terms to be interpreted as synonymous, but although they are used to calculate profitability, they are different indicators. The main difference between these two calculation methods is, in short: the markup is associated with the cost; the margin is associated with the sales price; Cost Composition Important: we know that the markup is associated with the cost.

Therefore, it is important to compose this cost as Colombia Mobile Number List completely as possible, considering: Sales taxes (example: rate paid monthly on revenue); Fixed administrative expenses (examples: telephone, internet, salaries, benefits, maintenance, fees, security, etc.); Fixed sales expenses (examples: commissions, packaging, shipping, marketing, etc.); Fixed indirect production costs (outsourced, transportation, storage, etc.); Variable taxes on sales (examples: other fees, charges and surcharges); Now, let’s check this difference in practice? Markup What is Markup? It is the percentage calculated on the cost of the product to arrive at the final sales price. What is Markup for? To indicate the relationship between the cost (of production or distribution) of a good or service and its selling price. Markup calculation formula: MKP = [Total percentage of your sales price – (Variable expense + Fixed expense + Profit)] Shall we look at a practical example? Renato runs a pet shop in Curitiba, and needs to price a 5kg package of food for adult dogs.



Adding taxes and commissions, Renato today pay What is the best option? You don’t need to “choose” which is the best option for your business, as the two are, in fact, different analysis metrics, according to the beginning of the text. Each one has its own particularities and can serve you better; The most important thing is to know the main difference between them and how their calculation is applied. One helps you form the selling price of an item – markup – the other indicates how much profit you made from the sale of the respective item – margin. Conclusion The markup helps to indicate the cost of producing and distributing a product or service, detailing all expenses before putting it up for sale. While the margin is associated with the gross gain on sales. These and other financial indexes help companies to have a precise idea of ​​how and how much they can carry out discounts, negotiations and offers, without incurring losses or suffering from the competition and even harming the sales team's strategies. To this end, the professional or responsible person who knows the main difference between these metrics has the confidence .