½Û×ÓÊÓƵ

A mark-up computation uses a trader's purchase records as a starting point for the calculation of hypothetical sales for a given period. For example, a newsagent will charge the cover price for newspapers and magazines; an electrical retailer may charge the manufacturer's recommended price, or offer a specific discount thereon; a publican may follow the prices charged by managed houses operated by his brewer.

Hypothetical sales represent the cost of goods sold during the period plus the calculated gross profit thereon, allowance being made for various factors which reduce gross profit. The calculation may be expressed by the following formula:

where:

V = the value of hypothetical sales

P = cost of goods purchased for resale during the period

L = cost of 'shrinkage' during the period arising from waste, pilferage, gift, obsolescence and other causes

M = average mark-up applied by the trader expressed as a decimal

R = value of reductions in selling price made during the period, eg by way of selective discounts and bargain sales