The trader's margin

A percentage margin can be computed on the selling price or on the cost: these are two different bases and give different results. The case of the margin on the selling price requires solving a small equation, because the unknown also appears in the base.

Example — The trader's mark-up

A trader buys at the price $C=40$ EUR and wants a margin of $25\%$ on the selling price (not on the cost). Setting $V$ as the selling price: $V - C = 0{,}25\,V \implies V(1-0{,}25) = 40 \implies V = \frac{40}{0{,}75} = \boxed{53{,}33}\text{ EUR}.$ If instead they wanted a mark-up of $25\%$ on the cost, $V = 40\cdot 1{,}25 = 50$ EUR would suffice: the difference between the two bases is always a source of confusion.

The margin on the selling price leads to $V=53{,}33$ EUR, the one on the cost to $V=50$ EUR: clarifying with respect to what the percentage is computed is, once again, the decisive question.

Links

Topics: Percentages
Concepts: Mark-up · Commercial margin
Skills: Calculating · Solving equations