Please explain mark up and gross profit .?

Question

having problems explaining the difference to my wife that mark up of 100 plus 300% = 400.

selling price of 400 = (100%)

therefore cost price is 25%

and gross profit is 75%

Answer 1

Mark up is the %age increase you put on an item when you sell it. Therefore if you buy an item for £10 and sell it at £20, you have put a 100% mark up on that item.

Gross profit is calculated thus:

sales, less (opening stock, plus purchases, less closing stock)

Unless your mark up on all stock was the same, you could only calculate an average mark up from the gross profit figure.

Answer 2

Please explain to your wife that the 100 is the original cost of the item, and the selling price is 400. So your mark up is 300. When markups are quoted as a percentage we let the original cost represent 100% therefore in this case if 100 = 100% then 300 = 300% and this is what you were saying. Now when you look at the cost price as a percentage of the selling price you have 100/400 x 100 = 25%.

Gross profit is the difference between the selling price and cost price 400-100 =300.  

To express Gross Profit as a percentage of selling price this is GP/SPX100  = 75%  as you stated.