Thursday, April 20, 2017

Calculating Markup and Margin Percentage for Retail Clothes

Apparel costing techniques can be an important tool to make more sales. Retail clothes companies are concerned with the bottom line profits. In the aim to achieve greater profit, the company will decide the retail price of garments for which the garment will be sold after adding markup. Calculation of markup percentage and margin percentage in garments costing is very important. In this article it will explain with example. Mark-up is the amount added to the buying price to achieve the retail price.

Mark-up = Retail price + Buying price (Cost price)

Retail price = Buying price (Cost price) + Mark-up

Buying price (Cost price) = Retail price - Mark-up

 
Mark-up percentage vs margin percentage
Fig: Mark-up percentage vs margin percentage
Calculation of markup percentage for apparel:
To calculate mark-up percentage, divide dollar mark-up by the cost price, where dollar mark-up is the difference between retail price and cost price.

                      (Retail price - Cost price)
Markup% = --------------------------------------- x 100
                              Cost price
Calculation of margin percentage for garments:
To calculate margin percentage, divide dollar mark-up by the retail price, where dollar mark-up is the difference between retail price and cost price.

                     (Retail price - Cost price)
Margin% = --------------------------------------- x 100
                               Retail price

Example-1: Calculates the mark-up percentage and margin percentage for a casual dress if the cost price is $60 and the retail price is $120.

Example-2: Calculating mark-up and margin percentage.

Answer:

Markup = $ Mark-up ÷ $ Cost Price
= ($120 - $60) ÷ $60
= $60 ÷ $60
= $1

in % = 100%

Margin = $ Markup ÷ $ Retail Price
= ($120 - $60) ÷ $120
= $60 ÷ $120
= $0.5

in % = 50%

Note 1: $ Markup in Example 18.3 is the difference between retail price and cost price.

Note 2: Mark-up percentage can be more than 100%, but margin percentage never exceeds 100%.

In calculating margin percentage, the retail price is kept to 100%, which in turn is addition of cost price and margin percentage.