Surcharge and margin: what is the difference and how to count one into another
The margin is considered from the cost, the margin from the sale price. The same profit gives different interest, and confusion costs money. Formulas, table and examples for wholesale.
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Markup and margin describe the same profit, but refer it to different amounts. Surcharge. Profit as a percentage of cost. Marge Profit as a percentage of the sale price. The cost is less than the price, so the markup is always more than the margin.
Example
The goods were bought for 1,000 rubles and sold for 1,250 rubles. Profit - 250 rubles.
- Surcharge = 250 / 1000 × 100 = 25%.
- Margin = 250/1,250×100 = 20%.
Formulas
- Surcharge = (price - cost) / cost × 100.
- Margin = (price − cost) / price × 100.
- Price on markup = cost × (1 + markup / 100).
- Margin price = cost / (1 - margin / 100).
Counting one to the other:
- Margin = markup / (100 + markup) × 100.
- Mark-up = margin / (100 − margin) × 100.
Conformity table
| Surcharge. | Marge |
|---|---|
| 10% | 9.09 percent |
| 20% | 16.67% |
| 25% | 20% |
| 30% | 23.08 percent |
| 50% | 33.33% |
| 100% | 50% |
| 200% | 66.67% |
The markup can be as large as you want. Margin is always less than 100%: at 100% the whole price would be a profit.
The two of them are known to be the same as the two of them.
Where wrong.
Discount from the price when markup from the cost. A markup of 25%, the buyer was given a discount of 20% - it seems that 5% remains. In fact, 1,250 rubles minus 20% is 1,000 rubles: the goods were sold at cost. The discount is considered from the price, so you need to compare it with margin: at a margin of 20%, a 20% discount eats up all profits.
Planned margin through margin. We need a margin of 30% and a purchase of 30%. The margin is 23.08 percent. To reach a margin of 30%, the margin must be 42.86%.
Price with VAT against cost without VAT. Compare amounts on the same basis: both with or without tax. Otherwise, the tax will fall into the profit, which will have to be paid to the budget.
Incomplete cost. It includes not only the purchase price, but also delivery to the warehouse, duties, packaging. Without them, margins on paper are higher than in life.
What's more convenient in wholesale
It is convenient to assign prices by margin: we took the purchase price, multiplied by the coefficient. It is convenient to calculate the result: how many kopecks from each ruble of revenue remains after payment for the goods.
In wholesale prices, this usually looks like several price columns - retail, small wholesale, large wholesale, dealership. The difference between them is the discount from the price, and the limit for it is the margin of the retail column, not the markup.
Frequent questions
Which is more, margin or margin?
With the same profit margin is always greater, because it is considered from a smaller value - the cost.
What do you need to get a 50% margin?
100%: the product must be sold twice the cost.
How is margin different from profit?
Margin in this sense is gross profit as a percentage of the price: price minus cost of goods. Net profit is less: rent, salary, logistics and taxes are deducted from it.
Can margins be negative?
Yes, if the goods are sold cheaper than the cost of production - for example, in the sale of balances.
