What's the markup on bread?

[JimOfAllTrades]

@Joey P

I should have clarified a bit more. Markup is a percentage. What your talking about is the difference between gross profit and net profit (or net income).

Here is a sample VERY basic Profit and Loss Statement.

   $10.00     Income (what an item was sold for)
  -$8.00       Cost Of Good Sold
  --------
   $2.00       Gross Profit
  -$1.98       Expenses
  --------
   $0.02       Net Income
 
Markup 20%

Markup is found by doing: Gross Profit/Income x 100

Slight terminology nitpick.

Your simple P&L is correct, but all of my customers (I write and sell financial software for small businesses) call this “margin” (specifically “Gross Profit Margin” in the case you describe) not “markup”. This seems to be what Pygmy Rugger was saying.

Markup is the same dollar amount, but is usually expressed as a percentage of cost, not income.

So in your example, the (Gross Profit) margin is 20%, while the markup is 25% (the same $2 expressed as percentage of the $8 cost instead of the $10 income).

The difference between Gross and Net profit is, as you point out, the overhead expenses (or G&A, or whatever you want to call the expenses not directly associated with Cost Of Goods). Subtracting these expenses from Gross Profit gives you Net Profit, dividing that into Income and multiplying by 100 gives you the Net Profit Margin (as a percentage).

[TokyoBayer]

@Joey P

Not only that, but a farmer I know recently attened some sort of organic farmers convention and learned that fertalizers can be air/wind born and travel up to five miles. Technically (though I don’t know if this is part of the certification process) the farm where you from your organic produce can’t have any fertalizer spread within five miles of it. I’d imagine fertalizer travelling 5 miles probably has to come from a crop duster to begin with, but still, keeping the area around the organic produce fertalizer free is yet another expense.

There are major expenses involved with organic farming and food production. One of my friends is an organic certifier (and the top Western expert on Japanese organic certification) so I’ve heard about organic food for a decade and a half. Really interesting subject.

[Kent_Clark]

Here’s an extremely brief look what makes up the cost of food.

Per Shagnasty “cost” does not mean “profit.”

[DanBlather]

@RJKUgly

Slight terminology nitpick.

Your simple P&L is correct, but all of my customers (I write and sell financial software for small businesses) call this “margin” (specifically “Gross Profit Margin” in the case you describe) not “markup”. This seems to be what Pygmy Rugger was saying.

Markup is the same dollar amount, but is usually expressed as a percentage of cost, not income.

So in your example, the (Gross Profit) margin is 20%, while the markup is 25% (the same $2 expressed as percentage of the $8 cost instead of the $10 income).

I own a retail store and was just about to post the same thing. Markup and margin are easy to confuse. If I buy something for 50 cents and sell it for a dollar I am marking it up 100% and have a 50% margin.

[FlippyFly]

From the makers of “Wonderbread” - Interstate Baking Corp:

InterstateBakeriesCorp.com is for sale | HugeDomains

Most recent annual report, page 49, of the Net Sales (this is the money brought in from the stores buying the product from the company, not the customer)

50.7% Cost of products sold (ingredients, factory labor, energy, overuse)
49.1% Selling, delivery, admin (sales staff, logistics and trucks, office labor, advertising and promotions)
2.5 % Depreciation

-1.8% Operating loss

So in other words, they aren’t making any money, but you can see that about 50% of the cost of the loaf of bread is ingredients and costs from the factory (conversion costs to change the flour to bread) and 49% comes from the logistics of getting it to the store shelf (think about how much gas costs you… now imagine driving a fleet of bread trucks around the city or country everyday).

Just to note, these numbers are for the company as a whole, so they may make money on wonderbread but lose it on dolly madison.