BUSINESS MATHEMATICS:DIFFERENTIATING MARK UP FROM MARGINS

DEFINITION OF TERMS
Profit is what remains of the selling price (sales) after all cost and expenses had been deducted (Lopez-Mariano
2016, 126). It is also defined as a financial gain, especially the difference between the amount earned and the
amount spent in buying, operating, or producing something.
Cost means the purchase price of an article or a product to be sold or a service to be rendered.
Expenses is the cost required on something; it also refers to money spent on operating expenses (administrative and
selling expenses) and financial expenses
Loss occurs when the cost and expenses exceed the selling price or sales.

Identify whether this business situation signifies a profit or a loss.

1. You bought a bag for ₱ 800.00. You spent ₱ 50.00 for transportation in going to the store to but it. For the
following independent cases, determine whether you earn a profit or incurred a loss.
A. You sold the bag to your friend for ₱ 1,000.00; B. You sold the bag to your friend for ₱ 700.00.
2. Abigail purchased a suitcase for ₱ 1,200.00. She paid ₱120.00 for delivery of the suitcase from the seller to her
place. She asked the help of Bernadette to sell the suitcase. She promised to give Bernadette ₱150.00 if Bernadette
could sell the suitcase for ₱2,000.00 Bernadette was able to sell the suitcase for ₱1,900.00 to which Abigail agreed.
A. Did Abigail gain profit or incurred a loss when Bernadette sold her suitcase?
B. What formula did you used to identify whether Abigail has gained profit or incurred a loss?

The difference between margin (also known as gross margin) and markup is that margin
is sales minus the cost of goods sold, while markup is the amount by which the cost of a product
is increased in order to derive the selling price.

The cost of Nanay Pacing homemade peanut butter is P80 and its retail price is P120, find the
following:

a. How much is the margin?

b. What is the margin percentage?
Solution:
Given: Selling Price ( ) = P120 Cost of Goods ( ) = P80 Margin= ?

a. Since margin is sales minus the cost of goods, we will just subtract 80 from 120 which will give us
40. We have

Thus, the margin is P40.

b. To find the margin percentage, we will just divide the obtained margin by the selling price.

or

Thus, the margin percentage is 33.33%

BUSINESS MATHEMATICS:DIFFERENTIATING MARK UP FROM MARGINS