The goal for the retailer is to balance high and low markup items to achieve an average markup that produces a desirable profit for the overall operation. This gross profit margin, usually expressed as a percentage of cost or selling price, must pay for all expenses and provide for a profit. For example, the average gross margin needed by a business may be 35 percent. All goods must be sold at a price that is an average of 35 percent above their cost price. Because of demand and competition, some goods will be marked higher and some lower than 35 percent.
Some products can have only very little markup.
Competition is such that if the retailer were to price the item even slightly above competition, it would not sell. Other items that are not as competitive may have a much higher than average markup. You decide to start out in a new business venture by producing 100 T-shirts. You have gathered the flyers and business cards below. Now you have to calculate the details.