Making Sense of Markups
Pricing Products

Does a retailer make the products it sells?
◦ Not Usually –buy from wholesalers/producers

Does a Retailer buy a shirt for $15 and
sell it to customers for $15?
◦ Why or Why not?

If a retailer does not sell its products for
more than what it cost them, what would
happen?
Rounding in Marketing

Round money to the nearest 100th
◦ $435.34555
◦ $435.35

Round Percentages to nearest tenth
◦ 97.567%
◦ 97.6%
Pricing Products

To make a profit, what must a business do
with the products they buy to sell?
◦ Mark them up
What is Mark-up

Cost: the initial price paid by
retailers/manufacturers for the products they sell
◦ Includes shipping costs

Markup: adding a dollar amount (markup), as a
percentage or a dollar amount, to the cost of the
products purchased to sell to customers
◦ Used by retailers and wholesalers primarily

Retail Price: The total price charged for a
product sold to a customer, which includes the
manufacturer's cost plus a retail markup.
Convert % to a Decimal
• Process: Drop the % symbol and move the
decimal point 2 places to the left
Example: Convert 75% to a decimal:
Example: Convert 8.5% to decimal
Answer 8.5% = 0.085
Example: convert 180%
Answer 180% = 1.80
How to Markup
Most difficult thing to determine in
business is how to price your product
 Should every product a business sells be
“marked-up” the same percentage?”

◦ No, every item is different and is based on:
 Customer Demand for a product
 What competitors are pricing their products for
Calculating Markup Amount

Formula: Markup = Retail Price – Cost
◦ Difference between retail price and cost
◦ The markup may also be called the gross
profit or profit margin
Example
Discount Electronics purchased HDTVs for
$489.56 each and sells them for $899.99
 What is the markup amount on each TV?

Markup = Retail Price – Cost
 Mark up =
899.99 – 489.56 = 410.43

Calculate Retail Price w/Markup
Rate


First calculate the markup amount
Then add the markup amount to the
cost to equal your Retail Price
Two Step Formula:
 Markup = Cost * Markup Rate
 Retail Price = Cost + Markup
Example
Wholesale Jewelers, Inc. sells digital
watches to jewelry stores for $18.45
each. The suggested retail price is to add
a mark-up rate of 160% of cost. What
is the suggested retail price?
29.52
 Markup =
*
=
 Retail Price =
=
47.97
+

Formula:
 Markup = Cost * Markup Rate
 Retail Price = Cost + Markup
Let’s Practice

What is 170% of $125 cost
◦ Markup
◦ Retail Price:

104% of $4329 cost is what?
◦ Markup:
◦ Retail Price:
Calculate Additional Quantity
You want to purchase more product than last
year.
Formula:
◦ Additional Quantity = Original order * converted %
◦ Total Order = Additional Quantity + Original order
Example:
 You bought 95 hats last year and want to
increase your order by 50% more this year.
 95 X .50 = 47.50
 47.50 + 95 = 142.50 round up/down
◦ How many are you buying?
 143 items
Example

If our school store purchased 144 mittens
last year, and this year we would like to
purchase 30% more than last year. How
many mittens do we need to order this
year?
144 * .30 = 43.2
 144 + 43 = 187 mittens

Markup as a Rate (Percentage)
The markup rate is the markup
expressed as a percent
 Businesses usually express the markup in
one of two ways:

◦ As a percent of the Retail price
◦ As a percent of Cost
Markup as a Percent of Retail Price
Businesses usually express the markup as a
percent of the retail price (selling price)
 Formula: Markup rate = Markup / Retail Price
 Example: Luggage costs $54 and you want to
sell it for $90, what is the markup rate based on
retail price?

◦ Markup Amount = Retail Price – Cost
 $90-$54 = $36 markup
◦ Markup rate = Markup / Retail Price
 36/90 = .40 or 40% markup Rate
Markup as a Percent of Retail Price

A Florist buys roses for $10.99 a dozen and sells
them for $24.95 a dozen. What is the markup
rate based on the retail or selling price?

Markup = Retail Price – Cost
 Markup Amount = 24.95-10.99
= 13.96


Markup rate = Markup / Retail Price
Markup rate = 13.96/24.95
◦ Markup rate = .5596
◦ Markup rate = 56%
Markup as a Percent of Retail Price
Our school store purchases a printed Under
Armour hooded sweatshirt from Gear for Sports
for $37.50. We sell the hooded sweatshirt for
$60.00. What is the markup rate based on
retail price?
Markup rate = Markup / Retail Price
 $60.00 – $37.50 = $22.50 markup

◦ $22.50 / $60.00 = .375 = 37.5%
Markup as a Percent of Cost
Many businesses use the cost to figure
the markup rate
 Formula: Markup rate = Markup / Cost
 Example: Rain suit cost $120 and you
want to sell it for $162. What is the
markup based on cost?

◦ First calculate markup:
$162- $120 = 42
◦ Next calculate markup rate: 42/120 = 35%
Practice

Gear for Sports sells under armour t-shirts
to the school store for $13.50 each. They
have a suggested retail price computed by
marking up the cost by 60%. What is the
suggested retail price?

Markup = Cost * Markup Rate
◦ 13.50 * .60 = 8.10

Selling Price = Cost + Markup
◦ Selling Price = 13.50 + 8.10 = $21.60
Post Test
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Markup = Retail Price