Markup is Markup: formula. Product markup

Table of contents:

Markup is Markup: formula. Product markup
Markup is Markup: formula. Product markup

Video: Markup is Markup: formula. Product markup

Video: Markup is Markup: formula. Product markup
Video: Markup = Selling Price - Cost (with solved problems) 2024, December
Anonim

Markup on goods represents the seller's net income. Its value is determined based on the structure of the market, the consumer properties of the product being sold. To prevent trading activities from being unprofitable, the margin is set in such a way that it covers all the costs of the seller associated with the purchase of raw materials, the manufacture of goods and transportation. In a generalized form, a markup is the value added, expressed as an addition to the final price of a product or service. It pays for the expenses of the enterprise and allows it to pay taxes and make a profit.

The role of the state in the formation and control of markups on goods and services

Taking into account the fact that the Russian Federation is a state whose functioning is based on a market mechanism for regulating supply and demand, its role in the formation of margins on sold products and services is limited to exclusively controlling functions.

Thus, the margin on goods is the exclusive authority of enterprisesand organizations operating in trade and economic activities (according to the Methodological recommendations for the formation of tariffs for products). The basic rule is that it must cover the costs of the seller, as well as the amount of deductions (taxes, insurance premiums).

The state and its authorities can set its maximum size only for certain groups of goods (the exclusive authority of the Government of the Russian Federation). The mark-up in a store, enterprise, firm for products intended for children's consumption (milk formulas), some types of medicines (medical devices) is established by the executive authorities in a particular locality. This is necessary in order to prevent arbitrary increases in the prices of essential goods. This is monitored by specially authorized territorial bodies of the antimonopoly service.

markup is
markup is

Trade margin: formula for calculating the turnover (total) of the enterprise

It is known that there are several prices for goods and services: retail, wholesale, purchasing. All of them differ in the way they acquire and further sell their products. The calculation of the margin must also be calculated in various ways. There are two main methods of calculation: by total turnover and by assortment. Each of them is used in a specific situation, and therefore they cannot be considered universal. However, there is a general principle - in all cases, the trade margin is considered as an absolute indicator, and it is expressed in the form of gross income.

The margin calculation isthe following formula:

Gross income=(volume of total turnover) x (calculated trade markup): 100. In this case, the value of the calculated markup=trade markup: (100 + trade markup in%) x 100. By combining 2 formulas, we get a method for calculating the markup by total turnover: IA=(total turnover x trade margin in %): (100 + trade margin in %)

This method can be applied only if it is necessary to find the value of the margin on goods sold that have homogeneous characteristics. Simply put, it can be both food and alcoholic products. It is important that the calculated products do not differ from each other and ideally have one value of the trade margin, which must be calculated in monetary terms.

markup formula
markup formula

Calculation of the markup for the range of goods turnover

Most large retail outlets offer a variety of products. This means that for the profitability of the enterprise for different categories of products sold, individual margin coefficients are established. To calculate the total markup for all products, other indicators must be used. Thus, the markup on a product can be calculated using the following formula:

  • Gross income=(T1 x PH1 + T2 x PH2 + …Tn x PHn): 100.

    Here, T1 is the value of the turnover of a particular group of goods, and PH1 is the estimated trade markup for this group. You can calculate PHn using the formula:

    PHn=THn: (100 + THn) x 100. Where THn is the value of the group trade markupgoods in % terms.

In conclusion, it should be noted that the markup is the total gross income of an enterprise or firm, expressed in cash and covering the costs of mandatory government payments and expenses. Calculation using this formula is possible provided that each group of goods sold by a trading network or enterprise has different margins, in addition, they must be recorded in the appropriate columns of the balance sheet.

markup on goods
markup on goods

Unconventional ways to calculate the markup on goods and services: by average percentage

This method of calculating the margin is simple and transparent. This allows you to use it for calculations in any, even in a small organization. However, there is one significant drawback - the data are averaged, and the formula itself cannot be used to calculate the amount of taxation (Article 268 of the Tax Code). Gross income by average interest is:

  • VD=(size of turnover (T) x average percentage of gross income (P)): 100.

    In this case, the value of the average percentage of VD is: P=(trade markup at the beginning of the reporting period + trade markup on goods of the reporting period - trade markup on goods retired from circulation): (T + balance of goods at the end of the reporting period) x 100.

It should be noted that in this formula, the margin is an average value calculated taking into account the company's turnover and actual indicators at the time of calculation (surcharge on the balance of production, surcharge on goods out of circulation). Receivedvalues cannot be used in official reporting submitted to the tax authorities. This may result in a fine for the lack of proper accounting of objects that are subject to taxation. Moreover, it can be regarded as an attempt to hide from taxes, which is punishable by law.

markup calculation
markup calculation

Features of calculating the value of the margin for the assortment of the rest of the company's goods

The calculation of gross income on the balance of goods can only be made after the inventory, which must be done at the end of each month. As calculated indicators, data on the value of the remaining goods at the end of the month and the cost of products sold are used. So, the amount of income will be:

Vd=(sales allowance on the first day of the billing month + sales allowance for the current period - allowance for goods that have been withdrawn from circulation) - trade allowance for the balance of goods based on the results of the inventory

It makes sense to use this method of calculation for small enterprises or firms that keep records using barcodes. Based on this formula, we can conclude that the margin is the amount of profit of an enterprise, firm, institution, calculated according to the residual principle.

markup in the store
markup in the store

Conclusion

It should be noted that such a concept as the amount of margin, or trade margin, is used by enterprises with any size of turnover. This indicator will give accurate data on the amount of income, as well as on the unprofitability of the institution's activities. In general, the markup is the net profit of the firm,without all the costs: taxation, payments to non-state funds, current costs. Competent maintenance of the balance sheet will make it possible to draw a conclusion about the profitability of the enterprise and the need for further production of goods.

Recommended: