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If I want a gross margin of 25%, what percent should I mark up my product?

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Question added by Yazan Ahmad , programmer , wysada
Date Posted: 2016/12/29
manseer muhammed ali
by manseer muhammed ali , Accountant General , Royal Lighting L.L.C & Royal Furnishing LLC

To achieve a gross margin or gross profit percentage of 25%, you will need to mark up your product's cost by 33.333%. The following illustrates how this is calculated.

 

Assume a product has a cost of $75 and a selling price of $100. Since the gross profit is defined as selling price minus the cost of goods sold, this product will have a gross profit of $25 ($100 minus $75). The gross margin or gross profit percentage is 25% (gross profit of $25 divided by selling price of $100). The mark up of $25 on the cost of $75 equals 33.333% ($25 divided by $75).

 

Let's prove this with one more example. Assume you have a product that you purchased for $9. If you mark it up by 33.333%, you will have a markup of $3 and the product will sell for $12. The income statement will show a sale of $12 minus its cost of $9 for a gross profit of $3. The gross profit of $3 divided by the selling price of $12 equals a 25% gross margin or gross profit percentage or gross profit ratio.

Abdullah Aziz Eldain Morsi  Elgendy -        CMA  Candidate
by Abdullah Aziz Eldain Morsi Elgendy - CMA Candidate , Regional Receivable Accountant , Amiantit Group of Companies

Markup  percentage = gross margin/ unit cost

 you did not mention the unit cost  so assume to be 100=

25%=gross margin /100

=25%/100

=2.5%

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