How can I explain engineering economics to the layman?

[olivermoontan]

In the traditional estimating process, "Cost plus" is the established norm. Cost plus 20% on $1000 is obviously $1200.
I try to explain how using the divisible multiplier .8 ($12500) is the correct way to mark up a project 20% I am met with heated opposition, because they have always known 200 to be 20% of 1000. Any suggestions?

 

[dik]

Not sure, but if your are increasing it by 20%... you are effectively multiplying it by 1.2 or dividing it by (1/1.2)

Dik

 

[JStephen]

I'd be curious to know where "the correct way to mark up a project" came from. That sounds like "the way we always did it" to me. If you "mark something up 20%", you add 20% of the original cost to it and $1000 becomes $1200. If you want "20% of the final price to be mark-up", then you need 1000/(1-.2)= $1250. But I would never assume the latter method if it was just referred to as a 20% markup.