Explanation:

By definition, the markup percentage calculation is cost X markup percentage. Then add that to the original unit cost to arrive at the sales price. The markup equation or markup formula is given below in several different formats. For example, if a product costs $100, then the selling price with a 25% markup would be $125.

Gross Profit = Sales Price – Unit Cost = $125 – $100 = $25

Now that you have found the gross profit, let’s look at the markup percentage calculation:

Markup Percentage = Gross Profit/Unit Cost = $25/$100 = 25%

The purpose of markup percentage is to find the ideal sales price for your products and/or services. Use the following formula to calculate sales price:

Sales Price = Cost X Markup Percentage + Cost = $100 X 25% + $100 = $125

As with most things, there are good and bad things about using markup percentage. One of the pitfalls in using the markup percentage to calculate your prices is that it is difficult to ensure that you have taken into consideration all of your costs. By using a simple rule of thumb calculation, you often miss out on indirect costs.

Let the CP be Rs 100,

So the SP in first case becomes = Rs. 100– 20% of 100

=> 100–20= 80

In the case of 5% gain, SP= Rs.105

So the difference in both SP is= 105–80= 25

But the actual difference is = 200

So when the difference value is 25, then the actual value of difference = 200

when the value is 1, then the actual value = 200/25

when the value of CP is 100, then the actual value of CP is = 200/25 x 100

So the actual value of CP is = Rs. 800