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In article .com,
wrote:
Here's my view. Say I have a product with my cost of $100.00
I want to add 28% to that. I think I should end up at $128.00.
My math is simply $10.00*1.28 = $12.80
However, I have had someone else tell me that I'm wrong and need to do
the following.
First. 100-x=y
Second. 100/y=z
Third. A*z=$$$.$$
So,
First. 100-28 = 72
Second. 100/72 = 1.38888889
Third. 10*1.3889 = $13.89
Now to me this person is crazy. I mean I sold stuff for years and
sales tax wasn't that complicated. If something was $10.00 + %5.75tax,
the total is $10.58.
Not 100-5.75 = 94.25, 100/94.25 = 1.061007, $10.00*1.061007 = $10.61
Why would he think that he's correct? Is it some accounting practice,
but not real world practice? Or maybe something a person not originally
from the US would have learned?
Thanks for clearing this up.
First the short answer: I think that you are right and "someone else" is wrong.
However, quoting markups and markdowns is not something that I do in a
*business setting*. *Maybe* there are some people that calculate a 28
percent markup as done by "someone else".
Here's a mathematics compare-and-contrast of yours and *someone else"'s*
methods.
In your example, let's call the $100 cost to you, WP (wholesale price).
Your method adds 28 percent to WP and comes up with RP (retail price).
So, what you have done is RP = 1.28*WP. So, you can honestly state that
your markup is 28 percent of the WP, the cost to you.
*Someone else" does RP = WP/(1-.28) = WP/.72, a higher retail price than yours.
So, "someone else" can honestly state that his markup is 28 percent of the
RP, the retail price.
I have no idea why anyone would calculate or state their markup as done
by "someone else". Oh, here's a thought... some businesses apparently
like to think of markup (gross profit) as a percent of sales, so in THAT
case, selling the object for $100/.72 = $138.89 results in a 28 percent
profit on *sales*.
Your method result in a 28 percent profit on *cost*.
--- Joe Sent via 10.2.8 at 10:06pm PDT, July 10, 2005.
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