Markup and Trend: Difference between pages

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imported>Doug Williamson
(Create page. Sources: linked pages.)
 
imported>Doug Williamson
(Expand for bubbles, crashes and rational expectations.)
 
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''Cost and management accounting''.  
Market conditions under which there is believed to be a greater probability that a subsequent price movement will be in the same direction as the previous period's price movement (rather than in the opposite direction).


Markup is an amount added to relevant costs, to calculate a selling price.
Extended trends lead to bubbles and crashes.
 
It is usually expressed as a percentage of relevant costs.
 
Relevant costs will usually, but not always, be direct costs of production.
 
 
Markup is calculated in the same way as Margin on costs, using the same inputs:
 
''Markup = profit '''÷''' costs''
 
 
<span style="color:#4B0082">'''Example 1: Markup calculation'''</span>
 
Selling price = 100
 
Relevant costs = 70
 
 
The surplus (profit):
 
= selling price - costs
 
= 100 - 70
 
= 30.
 
 
And the markup:
 
= profit / costs
 
= 30 / 70
 
= '''42.9%'''.
 
 
''Note the Markup is normally used in a planning and price setting context, looking ahead. The similarly calculated Margin on costs may be seen equally in both historic accounting contexts and in planning and price setting.''
 
 
<span style="color:#4B0082">'''Example 2: Price setting using markup'''</span>
 
Costs = 70
 
Markup = 42.9%
 
Calculate the selling price
 
 
Required surplus (profit):
 
= 70 x 0.429
 
= 30.
 
 
Selling price:
 
= costs + profit
 
= 70 + 30
 
= '''100'''.
 
 
Short cut calculation:
 
''Selling price = costs x (1 + markup)''
 
= 70 x (1 + 42.9%)
 
= 70 x 1.429
 
= '''100''' (as before).




== See also ==
== See also ==
* [[Cost]]
* [[Adaptive expectations]]
* [[Direct costs]]
* [[Bubble]]
* [[Management accounting]]
* [[Correction]]
* [[Margin]]
* [[Crash]]
* [[Overheads]]
* [[Efficient market hypothsis]]
* [[Profit margin]]
* [[Mean reversion]]
* [[Profit]]
* [[Overshooting]]
 
* [[Random walk]]
[[Category:Accounting,_tax_and_regulation]]
* [[Rational expectations]]
[[Category:The_business_context]]
* [[Trend analysis]]

Revision as of 09:09, 2 May 2018

Market conditions under which there is believed to be a greater probability that a subsequent price movement will be in the same direction as the previous period's price movement (rather than in the opposite direction).

Extended trends lead to bubbles and crashes.


See also

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