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?
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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