A supplier can produce a product for $160. The supplier sells the product to their client for $240, making a profit before tax of $80 on the transaction. What is the mark-up profit percentage earned by the supplier on this transaction?

The mark-up percentage is the profit expressed as a percentage of the original cost. The formula is: Mark-up % = (Profit / Cost) × 100. In this scenario, the cost to produce the product is $160, and the selling price is $240. The profit is the difference between the selling price and the cost, which is $240 - $160 = $80. Applying the formula: ($80 / $160) × 100 = 0.5 × 100 = 50%. Therefore, the supplier earned a 50% mark-up on this transaction.

33%: This represents the profit margin ((Profit / Selling Price) × 100), not the mark-up. ($80 / $240 = 33.3%). 159%: This figure does not correspond to a standard financial calculation for mark-up or margin based on the data provided. 67%: This is incorrect. It may result from an erroneous calculation, such as dividing the selling price by the profit.

Drury, C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning EMEA. Chapter 9, 'Pricing decisions and profitability analysis', defines and provides formulas for calculating cost-plus pricing, including mark-up on cost.

CIPS. (2019). Commercial Negotiation L4M5 Study Guide. Stamford, UK: Chartered Institute of Procurement & Supply. Chapter 3, Section 2, 'Costing methods', covers the concepts of cost, price, and profit, which are the components of the mark-up calculation.