CHAPTER 25 – FINAL ACCOUNTS: INCOME STATEMENT 1 Retail price
The price that customers are charged for goods is called the retail price. The retail price is the cost price of goods plus markup.
The markup is the percentage amount added to the cost price of goods to cover expenses and provide a profit.
A business calculates the markup on its goods as follows:
Gross profit Cost price × 100
Example
Dazzle Ltd makes a gross profit of €24 on each watch it sells. The cost price of the watches is €60 each. Therefore, there is a markup of 40%.
24 60 × 100 = 40%
The percentage difference between the cost price and the selling price of goods is called the margin. This is calculated as follows:
Gross profit Selling price × 100
Example
Dazzle Ltd makes a gross profit of €24 on each watch it sells. It sells the watches for €84 each. Therefore, the margin is 28.57%.
24 84 × 100 = 28.57%
Get Shirty Ltd buys T-shirts from a supplier for €5 each and sells them for €12 each.
1. What is the cost price of each T-shirt? 2. What is the retail price of each T-shirt? 3. What is the gross profit on each T-shirt? 4. What is the markup on each T-shirt? 5. What is the margin on each T-shirt?
Stock A
Go to page 178 of your Activities and Accounts Book to answer questions about stocktaking and stock value.
