Mark-up on Cost

Definition. Mark-up on cost expresses gross profit as a percentage of cost of goods sold (COGS). It answers: “By what percentage does the selling price exceed cost?”

Core formula. Mark-up % = (Selling price − Cost) ÷ Cost × 100. In decimal form: markup = (price / cost) − 1.

Relation to gross margin. Gross margin % = (Selling price − Cost) ÷ Selling price × 100. Conversion (use decimals): margin = markup / (1 + markup) and markup = margin / (1 − margin).

Worked example (simple). Cost = 100. Price = 132. Profit = 32. Mark-up = 32 ÷ 100 = 32.00%. Gross margin = 32 ÷ 132 = 24.24%.

Units and free quantities. When free units exist, compute an effective unit cost by spreading total cost over paid + free units. Use that effective cost when comparing to the retail rate.

Bill-level allocations. If the organisation allocates bill-level items to lines, include only amounts “considered for costing” (e.g., discounts that reduce cost; freight-in, duties, non-recoverable taxes that increase cost). Exclude selling and administrative expenses from COGS when computing mark-up.

Example (with allocations). Total COGS after allocations = 9,050. Total units sellable = 1,100. Retail rate = 12.00. Revenue = 13,200. Profit = 4,150. Mark-up on cost = 4,150 ÷ 9,050 = 45.86%. Gross margin (for reference) = 4,150 ÷ 13,200 = 31.44%.

Display conventions. Label clearly as “Mark-up on cost (%)”. Round to two decimals for UI display; retain higher precision in calculations. Present alongside the underlying figures: net revenue, COGS, and gross profit.

Notes. Mark-up is a management/pricing metric. It is not a defined line item under IFRS/SLFRS, whereas gross profit and gross margin are commonly presented in financial statements.