Markup on goods represents the seller’s net income. Its value is determined based on the market structure, consumer properties of the product being sold. To prevent trading activities from being unprofitable, the margin is set in such a way that it covers all the expenses of the seller related to the purchase of raw materials, the manufacture of goods and transportation. In a generalized form, a mark-up is a value added expressed in addition to the final price of a product or service. She pays for the expenses of the enterprise and allows him to pay taxes and make a profit.
The role of the state in the field of formation and control of margins on goods and services
Given the fact that the Russian Federation is a state whose functioning is based on a market mechanism for regulating supply and demand, its role in the field of mark-up on sold products and services is limited exclusively to controlling functions.
So, the margin on goods is the exclusive authority of enterprises and organizations operating in commercial and economic activities (according to the Methodological recommendations on the formation of tariffs for products). The basic rule is that it should cover the costs of the seller, as well as the amount of deductions (taxes, insurance premiums).
The state and its authorities can set its maximum size only for certain groups of goods (the exclusive authority of the Government of the Russian Federation). The margin in the store, enterprise, company for products intended for children's consumption (infant formula), certain types of medicines (medical devices) is established by the executive authorities in a particular area. This is necessary in order to prevent an arbitrary increase in prices for essential goods. This is monitored by specially authorized territorial bodies of the antimonopoly service.
Trade margin: calculation formula for the turnover (total) of the enterprise
It is known that there are several prices for goods and services: retail, wholesale, purchasing. All of them differ in the way they purchase and further sell their products. The margin calculation must also be calculated in various ways. There are two main ways of calculating: total turnover and assortment. Each of them is used in a specific situation, and therefore they cannot be considered universal. However, there is a general principle - in all cases, the trade margin is considered as an absolute indicator, and it is expressed in the form of gross income.
The margin calculation is the following formula:
Gross income = (total turnover) x (estimated trade allowance): 100. At the same time, the estimated allowance = trade allowance: (100 + trade allowance in%) x 100. Combining 2 formulas, we get a way to calculate the markup for the total turnover: VD = (total turnover x margin in%): (100 + margin in%).
This method can be applied only if it is necessary to find the margin on the sold goods that have uniform characteristics. Simply put, it can be both food and alcohol. It is important that the calculated products do not differ from each other and ideally have one value of the trade margin, which must be calculated in monetary terms.
Calculation of margins for the range of goods turnover
In most large retail outlets, diverse products are presented. This means that for the profitability of the enterprise for different categories of products sold, individual margin factors are established. In order to calculate the total premium for all products, other indicators must be used. Thus, the markup on the product can be calculated by the following formula:
- Gross income = (T1 x PH1 + T2 x PH2 + … Tn x PHn): 100.
Here, as T1, the volume of goods turnover of a particular group of goods is considered, and PH1 is the estimated trade margin for this group. PHn can be calculated by the formula:
PHn = THn: (100 + THn) x 100. Where THn is the value of the trade markup of product groups in% terms.
In conclusion, it should be noted that the mark-up is the total gross income of an enterprise or firm, expressed in cash and covering the costs of mandatory government payments and costs. Calculation according to this formula is possible provided that each group of goods sold by the distribution network or enterprise has different margins, in addition, they must be accounted for in the corresponding columns of the balance sheet.
Unconventional methods of calculating mark-ups on goods and services: according to the average percentage
This method of calculating margins is simple and transparent. This allows you to use it for calculations in any, even in a small organization. However, there is one significant drawback - the data are obtained averaged, and the formula itself cannot be used to calculate the amount of taxation (Article 268 of the Tax Code). Gross income at an average interest rate is:
- VD = (turnover (T) x average percentage of gross income (P)): 100.
At the same time, the value of the average percentage of VD is: P = (trade allowance at the beginning of the reporting period + trade allowance for goods of the reporting period - trade allowance for retired goods): (T + balance of goods at the end of the reporting period) x 100.
It should be noted that in this formula the mark-up is the average value calculated taking into account the firm’s turnover and actual indicators at the time of calculation (surplus on the remaining products, surplus on goods out of circulation). The obtained values cannot be used in official statements submitted to the tax authorities. This may result in a fine for the lack of proper accounting of objects that are taxable. Moreover, it can be regarded as an attempt to hide from taxes, which is punishable by law.
Features of calculating the margin on the assortment of the balance of goods of the enterprise
The calculation of gross income for the rest of the goods can be made only after an inventory, which should be made at the end of each month. As calculated indicators, data are used on the value of the remaining goods at the end of the month and the cost of goods sold. So, the amount of income will be:
Vd = (trade allowance on the first day of the settlement month + trade allowance for the current period - allowance for retired goods) - trade allowance for the rest of the goods based on inventory results.
A similar method of calculation makes sense to apply for small enterprises or firms that keep records of barcodes. Based on this formula, we can conclude that the mark-up is the amount of profit of the enterprise, company, institution, calculated by the residual principle.
