Note on Markup vs Margin

Before delving into the details of assigning Selling Rates, it is necessary to pause for a moment and differentiate between the two modes in which profit can be measured, namely markup and margin. Although the two concepts are very similar, there is a subtle but distinct difference that needs to be highlighted. Markup is profit expressed as a portion of the net rate, whereas margin is profit expressed as a portion of the selling rate. Formally:

Markup = (Selling Rate – Net Rate) / Net Rate

and

Margin = (Selling Rate – Net Rate) / Selling Rate

As an example, take the scenario where a bill item has a net rate of £100.00 and a selling rate of £110.00.

This bill item has a markup of (110 - 100)/100 = 0.1 = 10% and a margin of (110 - 100)/110 = 0.091 = 9.1%.

Trimble Quest caters to both markup and margin calculations. Whenever profits are assigned to bill items, Trimble Quest will give the user a choice between applying the profit in markup or in margin mode, with markup mode being the default. For the sake of simplicity, this is also the default terminology used when referring to the profit of a bill item in this document. In all discussions, the word “Markup” can be interchanged with the word “Margin”, since the mode can be switched by the user at any point in time.

Next topic: Global Markup