It’s that time of year again, the 1st year marketing classes I’m teaching are learning all about markup and margin math. To help with the basics I’ve posted a video that demonstrates a really cool visual tool that keeps me from mixing up the formulas for markup and margin.
The “MC Chocolate Bar”, (yes, it has been helping students with marketing math since “MC” was popular), was shared with me when I first started teaching at St. Clair College in ON. (Thanks Bob Jershy – you’ve been gone for years but you’re still keeping me, and generations of students to come, straight with markups and margins.)
This little tool is just the “back of the napkin” mnemonic that keeps you making quick and accurate calculations without having to memorize formulas or do a lot of algebra.
The video goes through several examples and problems using the traditional formula/algebra approach, and also using the “MC Chocolate Bar”. I hope you think it is 12 minutes well spent.
I keep meaning to tell you that this is GREAT. I’m going to share with my class on Wednesday. Our text doesn’t use “margin” (eg. gross margin) in the markup language – they use “Mark up on Selling Price” and “Mark up on Cost”. Silly, it would be so much easier if authors could be a little more consistent considering how mind-twisting this is for students first time round!
So let me know when you’ve created a nice simplified BE video. That would be awesome too. 😉
I found your Markup and Margin Math site on you tube but could not find out how to ask any questions. If you have time to assist me I would greatly appreciate it. If I have the selling price of 108.50 and the rate of mark-up on cost is 24%, how do I go about solving this with your chocolate graph, if i cannot remember the equation You can e-mail me thx
Sure, I can help. An example like this one is used in the video toward the end. Like in the video, start by taking “inventory” of what you know. In your example you have:
SP = $108.50
M(on cost) = 24%
Just in case this is a homework question, I’m going to change the numbers a little. The process is the same, so you can see the example here, and then try it with your own numbers.
Let’s say that the Selling Price is $10.85 and the Markup is 24%.
Our inventory is:
SP = $10.85
M(on cost) = 24%
The selling price, $10.85 goes to the right of the diagram. The Markup on Cost goes to the left of the upper square of the diagram. Since this is a markup, the percentage is related to the cost, and the cost becomes the 100%. This goes to the left of the lower square of the diagram.
The equation SP = M + C always holds true, whether you are speaking in $ or in %. Looking at your squares, you can see that the M + C, or 24% + 100% combine to make the SP percentage of 124%.
You now have both the $ value and the % for the selling price. ($10.85 is 124% of the cost). You can now you set up your ratio.
You haven’t said what it is you are trying to find, the markup in $ or the cost in $. If you are looking for the cost, the ratio would be:
C/100% = $10.85/124%. When you cross multiply and divide you end up with ($10.85 x 100%)/124% = $8.75.
Using the same logic for finding the markup in $ you’ll get a result of $2.10.
I hope that helps and thanks for the question.
Thank you for the video Amanda! I am not very good with algebra, so the ‘chocolate bar’ calculation is perfect for me!