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Chapter 16

Gross profit mark-up and margin

2.1 Gross profit mark-up

Gross profit mark-up expresses profit as a percentage of cost of sales, e.g. a
mark-up of 25% means that profit is 25% of the cost of sales figure. In a 25% mark-
up situation the following cost structure would apply:

$ %
Sales 750 125

Cost of sales 600 100
Gross profit 150 25

2.2 Gross profit margin

Gross profit margin expresses profit as a percentage of the selling price, e.g.
margin of 25% means 25% of the selling price is profit. In a 25% margin situation the
following cost structure would apply:

$ %
Sales 800 100
Cost of sales 600 75

Gross profit 200 25

Illustrations and further practice

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