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#1
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Confusion on adding percentage of cost to that cost.
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. -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#2
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It's the difference between margin and markup, and it's very much real
world practice. If you want to mark up your price to 28% over *cost*, then your way is absolutely correct: =(128 - 100)/100 === 28% However, that means that your margin, or %profit on *sales* is only =(128 - 100)/128 === 21.875% If you want to make 28% profit on sales, you need to use = 100/(1-28%) === $138.89 Check your profit as a percentage of sales: = (138.89 - 100)/138.89 === 28% In article .com, wrote: 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. |
#4
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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. -- ------------------------------------ Delete the second "o" to email me. -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#5
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I say, something even a person originally from US should have learned. Otherwise, this person originally from US might be laughed-at by persons not originally from US. Let us analyze your $10-stuff example. You said if 5.75%, you just add 5.75 % of $10, which is $0.58, to the $10. So you sell the stuff at $10.58. Ok, so sale price is $10.58. Then taxman gets his 5.75% of $10.58. 0.0575 times $10.58 = $ 0.61 $10.58 minus $0.61 = $9.97 Hey, that is not $10, after tax! Suppose we follow this former foreigner. Sale = $10.61 Tax = 0.0575 times $10.61 = $0.61 After tax, $10.61 minus $0.61 = $10 Hey,.... Zeez, is there magic in what the guy learned from outside the US? Hardly. The guy just learned Math as Math is learned in and out of the US. It is Accounting, maybe. But it is just Algebra. Algebra anywhere. ---------- You want a crazier formula? Say, you have a product that worth "x". You know the sale tax is "t" percent. You want add "y" to "x" so that the selling price is (x+y). How much should this additinal "y" be so that, after tax, you'd end up exactly with "x" from this product. Sale price = x+y Tax = (x+y)*t Net = Sale minus tax = (x+y) -(x+y)t = (x+y)(1-t) Net = x, so, (x+y)(1-t) = x (x+y) = x/(1-t) y = x/(1-t) -x y = x[1/(1-t) -1] y = x[(1 -1(1-t))/(1-t)] y = x[t/(1-t)] ---the formula. Note: t is in decimals. So if the sale tax is 5.75%, then t = 0.0575 Apply this crazier formula to your $10 example. x = $10 t = 0.575 y = 10[(0.0575)/(1 -0.0575)] y = 10[(0.0575)/(0.9425)] y = 10[0.061] y = $0.61 -----*** Meaning, you really need to sell the product at $10.61 (not at $10.58) if you want a net of $10 after tax. -------- By the way, if you want to add 28% to $100, you will really end up with $128. Nobody anywhere will say "No way". -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#6
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So I guess it comes down to what is proper? I now understand how the two formulas could be correct depending on who is doing the looking. I can definitely see how the IRS would say "no way" to the quick formula :) So, if I have a product I make and want to put in a percentage of markup (to cover my labor) and then also add a percentage for a rep who sells the product, but still be competitive in the market.... Quick formula or long formula? -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#7
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On Mon, 11 Jul 2005 17:20:04 GMT, "ticbol" wrote: Let us analyze your $10-stuff example. You said if 5.75%, you just add 5.75 % of $10, which is $0.58, to the $10. So you sell the stuff at $10.58. Ok, so sale price is $10.58. Then taxman gets his 5.75% of $10.58. No, no, no. The taxman gets 5.75% of the sell price, $10.00. 0.58. Sales tax is not charged on sales tax. bob -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#8
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Bob, What is sales tax then? -------------- Taxman sees sale is $10.58 Taxman gets his 5.75% of that, which is $0.61 Taxman doesn't know---and he never cares---that 5.75% of $10 was added to the $10. Taxman never cares too if the original $10 were sold at $20. In this case, if sales is $20, tax is 5.75% of $20. -------------------------- Sales tax, Bob, sales tax. -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#9
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Strommsarnac, What is the quick formula? Is that the one by the guy who was not originally from the US? Is that the one were he got $10.61? And $13.89?, which should have been $138.89 because it was based from a $100. ---------------------------- Or, the quick formula is 100 *1.28 = $128 ? And the long formula is 100*1.38889 = $138.89 ? ------------------------------------- So, if I have a product I make and want to put in a percentage of markup (to cover my labor) and then also add a percentage for a rep who sells the product, but still be competitive in the market.... Quick formula or long formula? < Is that applicable here? Or, are the "quick" or "long" formulas mentioned above applicable to your marketing? The "long" formula is to get back the price you want, even after tax. .....but still be competitive... Looks like you have a different wish here. I'd say, to be less complicated, just use the "quick" formula. Regarding the analyzed $10-stuff, the $9.97 is surely more competitive than the $10----both after tax. -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#10
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On Tue, 12 Jul 2005 19:27:43 GMT, "ticbol" wrote: Bob, What is sales tax then? Tax on the merchant's selling price. This is standard US procedure and may be different from European VAT. (If you know of a US place that does it differently, let us know.) Item sells for $10.00. Sales tax is 8.25% (here), or 0.83. Merchant collects 10.83, sends 0.83 to the state government. If you honestly thought it was calculated otherwise, this serves to reinforce the point that a number of us made in response to the OP... be sure you understand the question before answering it. People will quibble over getting different answers, when the discrepancy was in how they understood the question. By the way, we do have an example here (California) of something like what you tried. There is also a state gasoline tax -- which is included in the regular selling price. The sales tax is calculated on top of that. So sales tax is paid on the gas tax. But that is something of a special case. regards, bob' -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#11
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You're both right -- it's a matter of definitions. My wife used to be a buyer at Carson Pirie Scott, a major retailer in Chicago. She used to talk about "markups" in this way and it drove me (a math major) nuts. Suffice to say that it was COMMON in her business for "markup" to refer to the amount added to the price, as a percentage of the FINAL price. If a price were doubled, math majors and other normal people (!) would call that a 100% increase; she and everyone down at CPS would call that a 50% markup. (By the way, for other responders who mentioned taxes: there is no reference to tax anywhere in the original post.) -- Kevin Killion 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 $100.00*1.28 = $128.00 [DECIMAL FIXED] 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 -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#12
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On Wed, 13 Jul 2005 15:06:14 GMT, Kevin Killion wrote: You're both right -- it's a matter of definitions. There is "Markup" and "Margin". The concepts used to be part of a grade 9 business math course here. Here's one reference: http://www.csgnetwork.com/marginmarkuptable.html -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
#13
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wrote about someone telling him that to "add 28% to $10" he should do the following: : First. 100-28 = 72 : Second. 100/72 = 1.38888889 : Third. 10*1.3889 = $13.89 This assures that the added amount ($0.89) is 28% OF THE FINAL TOTAL. Of course most (all? - anyone have a counter example?) sales taxes are computed (by law) as a percentage OF THE SALE PRICE, not as a percentage of the grand total. (Most Canadian provinces have TWO sales taxes, federal and provincial, and it is unconstitutional for one level of government to tax the taxes of another level of government. So sales tax as a percentage of the grand total would be unconstitutional here.) However, I do have an example where the calculation should be done as above. Condominiums in BC must put a percentage of their TOTAL BUDGET into a continguency fund. Normally, managers find the budget by adding up all the expected operating expenses for the year (say $10). Then they have to add an amount (say 28%) for the contingency fund. If they just add 28% of $10 (makes $2.80) then the total budget is $12.80 and the contingency fund gets only $2.80/$12.80*100%=22% of the budget, violating the law! On the other hand, the managers in the condominium I used to be part of always did it this way. (Actually the legal requirement is only 10% so our condo always put aside 9%. But the law has no teeth. Managers do not even have to be licensed, yet.) Robert, who is |)|\/| || Burnaby South Secondary School |\| || Beautiful British Columbia Mathematics & Computer Science || (Canada) -- submissions: post to k12.ed.math or e-mail to private e-mail to the k12.ed.math moderator: newsgroup website: http://www.thinkspot.net/k12math/ newsgroup charter: http://www.thinkspot.net/k12math/charter.html |
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