The formula to convert markup to margin is:
\[ \text{Mg} = \frac{\text{Mp}}{1 + \text{Mp}} \]
Where:
A markup is a measure of the total percentage above cost that a good is sold at, and the margin is defined as the percentage of gross profit to gross price. To convert markup to margin, divide the markup rate by 1 plus the markup rate.
Let's assume the following:
Step 1: Convert the markup rate to a decimal:
\[ \text{Mp} = 25\% = 0.25 \]
Step 2: Calculate the margin rate:
\[ \text{Mg} = \frac{0.25}{1 + 0.25} = \frac{0.25}{1.25} = 0.2 = 20\% \]
Therefore, the margin rate is 20%.
