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# General Retail Business Issues/Calculating cost when margin is unknown

Question
What is the formula to use to calculate the cost of an item when the margin is unknown, but MU% and retail are known?  Example, an item sells for \$10.99 and has a mark-up % of 29.4%, how do you determine the cost of the item?

Cathy,
In retail the formula for margin and cost is simple. Retail price always equals 100%, so if you know that the markup percent is 29.4% then the cost has to be 100% minus markup percent of 29.4% which equals a cost percentage of 70.6%, and 70.6% of the \$10.99 selling price is \$10.99 times .706 or \$7.76 cost and \$3.23 gross profit.  Knowing that cost plus margin will always equal 100% makes it easy once you know either the cost dollars, or percent or the margin dollars or percent.  Or, simply knowing that you need to make 47% profit tells you what you have to pay at any retail price as again, the retail price is always 100%.

Hope this helps, you need to think about it for some time, it is a deceptively simple concept yet takes a while to internalize.
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#### James E. Dion

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Most questions about trends in specialty retail, how customers are changing both in the US and Europe. Demographics for all countries as they relate to retail trends and issues. Store Operations, Buying and Merchandising.

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Over 40 years in the retail industry, store level, store manager, buyer, merchandise manager, Vice President.

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BS Psychology, MS Psychology, PhD(abd) Industrial Psychology Illinois Institute of Technology

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Microsoft, Harley-Davidson, Ritz-Carlton, Hummer, Williams-Sonoma, Ace Hardware, Coleman Spas, Aldo, Intel, Dell, Safeway, New Balance, IBM, Kodak, Bata International, Nortel Networks, Honey Baked Ham Co., Man Alive, Highsmith
B.S Chicago State University M.S. Chicago State University PhD (abd) Illinois Institute of Technology