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Mark-up and Margin

Forums › Ask CIMA Tutor Forums › Ask CIMA P1 Tutor Forums › Mark-up and Margin

  • This topic has 1 reply, 2 voices, and was last updated 10 months ago by Cath.
Viewing 2 posts - 1 through 2 (of 2 total)
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    Posts
  • February 20, 2022 at 5:22 pm #648990
    yinghou
    Member
    • Topics: 2
    • Replies: 2
    • ☆

    Below question from Kaplan Chapter 2 Example 7:

    A product has a total production cost of $60. Determine the selling price for the product if the company wants to achieve:

    (a) A 20% mark-up on total production cost
    Answer is $72
    (b) A 20% margin on total production cost
    Answer is $75

    Is there anyone can tell me why Mark-up SP is $72 and Margin SP is $75 please? I thought for same product Mark-up will give a higher price than Margin?

    Many thanks,

    March 23, 2022 at 3:01 am #651688
    Cath
    Member
    • Topics: 0
    • Replies: 423
    • ☆☆☆

    Hi there,
    Thank you for your question.
    There is no reason why markup would be higher than the markup. They are just different formula

    For example if product cost is $60 as above the:

    Selling price with 20% markup = 60 * 1.2 = $72

    Selling price if we are told its a 20% MARGIN then will be calculated as below:

    60 /1-0.2 = $75

    You just need to be aware in CIMA questions which one is being asked ( markup or margin) a comparison between the two is not required.

    Hope that helps
    Cath

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