7e
Contemporary Mathematics FOR BUSINESS AND CONSUMERS Brechner
Markup and Markdown
PowerPoint Presentation by Domenic Tavella, MBA
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a publicly accessible website, in whole or in part.
1
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PERFORMANCE OBJECTIVES
Section I Markup Based on Cost
8-1:
Understanding and using the retailing equation
to find cost, amount of markup, and selling
price of an item
8-2:
Calculating percent markup based on cost
8-3:
Calculating selling price when cost and percent
markup based on cost are known
8-4:
Calculating cost when selling price and percent
markup based on cost are known
Section II Markup Based on Selling Price
8-5: Calculating percent markup based on selling
price
8-6: Calculating selling price when cost and percent
markup based on selling price are known
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a publicly accessible website, in whole or in part.
2
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PERFORMANCE OBJECTIVES continued
Section II Markup Based on Selling Price
8-7:
Calculating cost when selling price and percent
markup based on selling price are known
8-8:
Converting percent markup based on cost to percent
markup based on selling price, and vice versa
Section III Markdowns, Multiple Operations, and Perishable
Goods
8-9:
Determining the amount of markdown and the
markdown percent
8-10:
Determining the sale price after a markdown and the
original price before a markdown
8-11:
Computing the final selling price after a series of
markups and markdowns
8-12:
Calculating the selling price of perishable goods
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
3
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Markup Based on Cost
cost of goods sold
• The cost of the merchandise sold during an operating
period.
• One of two major expense categories of a business.
operating expenses, or overhead
• All business expenses, other than cost of merchandise,
required to operate a business.
markup, markon, margin
• The amount added to the cost of an item to cover the
operating expenses and profit.
• The difference between the cost and the selling price.
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
4
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Cost, Amount of Markup, and
Selling Price of an Item
retailing equation
• The selling price of an item is equal to the cost
plus the markup.
• Selling price = Cost + Markup, SP = C + M
• Markup = Selling price – Cost, M = SP – C
• Cost = Selling price – Markup, C = SP – M
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a publicly accessible website, in whole or in part.
5
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The Retailing Equation
Finding the Selling Price:
• Lawn gnomes cost $6.80 per unit to produce. If a
markup of $9.40 per unit is added to the cost,
what is the selling price?
SP = C + M = 6.80 + 9.40 = $16.20
Finding the Markup:
• A box of golf balls sells for $28.50. If the distributor
was paid $16.75 per box, what is the amount of the
markup?
M = SP – C = 28.50 – 16.75 = $11.75
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
6
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The Retailing Equation
continued
Finding the Cost:
• After a wholesaler adds a markup of $45 to a Bluray player, it is sold to a retail store for $180.
What is the wholesaler’s cost?
C = SP – M = 180 – 45 = $135
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a publicly accessible website, in whole or in part.
7
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Markup Based on Cost
markup based on cost
• Manufacturers and wholesalers use cost as a
base when cost figures are readily available to
them.
• Percent markup based on cost = Markup = %Mcost= M
Cost
C
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a publicly accessible website, in whole or in part.
8
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Selling Price Based on Cost
Example
A firm purchases monitors for $275.59. The selling price is
$449.99. What is the markup? What is the markup based
on cost?
M = SP – C = 449.99 – 275.59 = $174.40
% M COST
M


C
174.40
 .6328  63.3%
275.59
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a publicly accessible website, in whole or in part.
9
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Selling Price Based on Markup
Example
A firm purchases pumps from a distributor for
$35.40 each. If the firm adds a 120% markup
based on cost, at what retail price should each
pump be sold?
SP  C(100%  % M COST )
SP  35.40(100%  120%)
SP  35.40 (2.2)
SP  $77.88
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a publicly accessible website, in whole or in part.
10
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Calculating Cost When Selling Price
and Percent Markup Based on Cost
Are Known
Calculating Cost Based on Cost:
Cost 
Selling price
100%  Percent markup on cost
SP
C
100%  % M COST
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
11
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Calculating Cost When Selling Price
and Percent Markup Based on Cost
Are Known Example
What is the cost of a printer that sells at retail for $1,750
with a 70% markup based on cost?
SP
C
100%  % M COST
1,750
1,750
C

 $1,029.41
100%  70%
1.7
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
12
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Calculating Percent Markup
Based On Selling Price
markup based on selling price
• When selling price is 100%, and the markup is
expressed as a percent of that selling price.
Percent markup based on cost 
% M SP
Markup
Selling Price
M

SP
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
13
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Calculating Percent Markup
Based On Selling Price Example
If a computer has a cost of $544 and is selling
for $999.99, what is the percent markup based
on selling price?
M = SP – C =
999.99 – 544.00 = $455.99
Markup
Percent markup based on cost 
Selling Price
% M SP
M


SP
455.99
 .4559
999.99
 45.6%
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
14
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Calculating Selling Price When Cost
and Percent Markup Based on
Selling Price Are Known
Calculating Selling Price Based on Selling Price:
Selling price 
Cost
100% - Percent markup on selling price
C
SP 
100%  % M SP
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a publicly accessible website, in whole or in part.
15
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Calculating Selling Price When Cost
and Percent Markup Based on
Selling Price Are Known Example
A store purchases beds for $212.35. If the store policy
is to mark up all merchandise 42% based on selling
price, what is the retail selling price of the beds?
C
SP 
100%  % M SP
212.35
212.35
SP 

 $366.12
100%  42%
.58
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
16
7e
Calculating Cost When Selling Price
and Percent Markup Based on
Selling Price Are Known
Calculating Cost Based on Selling Price:
Cost  Selling Price(100%  Percent markup on selling price)
C  SP(100%  %M SP )
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a publicly accessible website, in whole or in part.
17
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Calculating Cost When Selling Price
and Percent Markup Based on
Selling Price Are Known Example
A buyer is looking for a line of shoes to retail for
$79.95. If the objective is a 55% markup based on
selling price, what is the most the buyer can pay
for the shoes to still get the desired markup?
C  SP(100%  %M SP )
C  79.95(100%  55%)  79.95(.45)  $35.98
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
18
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Converting Percent Markups
Converting percent markups from cost to
selling price and vice versa:
• Convert a based on cost percent to a based on
selling price percent:
Percent markup based
=
on selling price
Percent markup based on cost
100% + percent markup based on cost
• Convert a based on selling price percent to a based
on cost percent:
Percent markup
based on cost
=
Percent markup based selling price
100% - percent markup based on selling price
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
19
7e
Converting Between Markup
Types: Selling Price Example
If the markup on a machine is 43% based on
selling price, what is the corresponding
percent markup based on cost?
% M COST
% M COST
% M SP

100%  % M SP
43%
.43


 .7543  75.4%
100%  43% .57
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a publicly accessible website, in whole or in part.
20
7e
Converting Between Markup
Types: Cost Example
If the markup on an oven is 200% based on
cost, what is the corresponding percent
markup based on selling price?
% M SP
% M SP
% M Cost

100%  % M Cost
200%

 2  .6666  66.7%
100%  200% 3
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a publicly accessible website, in whole or in part.
21
7e
Markdowns, Multiple Operations,
and Perishable Goods
markdown
• A price reduction from the original selling price
of merchandise.
markdown cancellation
• Raising prices back to the original selling price
after a sale is over.
sale price
• The promotional price of merchandise,
after a markdown.
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a publicly accessible website, in whole or in part.
22
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Determining the Amount of
Markdown
To find the amount of the markdown, take the
original selling price and subtract the sale
price from it.
Amount of
markdown
=
Original selling price – Sale price
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a publicly accessible website, in whole or in part.
23
7e
Determining the Amount of
Markdown Example
A coffee maker that originally sold for $59.99
was marked down to $47.90. What is the
amount of markdown?
Amount of markdown
Amount of markdown
= Original selling price – Sale price
= 59.99 – 47.90 = 12.09
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a publicly accessible website, in whole or in part.
24
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Determining the Markdown
Percent
To find the markdown percent, use the
percentage formula, Rate = Portion ÷ Base,
where the markdown is the portion, and the
original selling price is the base.
Markdown percent
=
Amount of markdown
Original selling price
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a publicly accessible website, in whole or in part.
25
7e
Determining the Markdown
Percent Example
What is the markdown percent on a pack of pens
selling for $2.99 that originally sold for $3.69?
Amount of
markdown
= Original selling price – Sale price
Amount of
markdown
= 3.69 – 2.99 = $.70
Markdown percent
=
Amount of markdown
Original selling price
.70
Markdown percent 
 .1897  19%
3.69
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a publicly accessible website, in whole or in part.
26
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Determining the Sale Price After a
Markdown
To find the sale price after a markdown, use the
formula Portion = Rate x Base, where the sale
price is the portion, the original price is the base
and (100% – markdown percent) is the rate.
Sale
Price
= Original selling price (100% – Markdown Percent)
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a publicly accessible website, in whole or in part.
27
7e
Determining the Sale Price After a
Markdown Example
Megastore originally sold packs of t-shirts for
$15 each. If the packs were marked down by
25%, what is the sale price of the shirts?
Sale Price = Original selling price (100% – Markdown Percent)
Sale price  15(100%  25%)  15(.75)  $11.25
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a publicly accessible website, in whole or in part.
28
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Determining the Original Price
Before a Markdown
To find the original selling price before a
markdown, we use the sale price formula
solved for the original selling price:
Original selling price
=
Sale price
100% – Markdown percent
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a publicly accessible website, in whole or in part.
29
7e
Determining the Original Price
Before a Markdown Example
What was the original selling price of a laptop
case, currently on sale for $48 after a 35%
markdown? Round answer to the nearest
cent.
Original selling price
=
Sale price
100% – Markdown percent
Original Selling Price 
48.00
48.00

 $73.85
100%  35%
.65
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a publicly accessible website, in whole or in part.
30
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Computing the Final Selling Price
After a Series of Markups and
Markdowns
staple goods
• Products, considered basic and routinely purchased,
that do not undergo seasonal fluctuations in sales.
seasonal goods
• Products that exhibit seasonal fluctuations in sales
and may undergo many markups and markdowns
during their selling season.
• When solving a series of markups and markdowns
on seasonal goods, remember that each markdown/
markup should be based on the previous selling
price.
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a publicly accessible website, in whole or in part.
31
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Computing a Series of Markups
and Markdowns Example
• In September, a tire shop purchased snow tires for
$48.50 each. The original markup was 55% based on
the selling price.
• In November, the tires were marked down 30%.
• In December, the tires were marked up 20%.
• In February, the tires were marked down 30% again
and in March were cleared out with a final 25%
markdown.
• What was the final selling price of the tires? Round
your answer to the nearest cent.
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a publicly accessible website, in whole or in part.
32
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Computing a Series of Markups
and Markdowns Example continued
SPOriginal
C

100% - % M SP

48.50
48.50


.45
100% - 55%
$107.78
MD November  107.78(100%  30%)  107.78(.7)  $75.45
MU December  75.45(100%  20%)  75.45(1.2)  $90.54
MD February  90.54(100%  30%)  90.54(.7)  $63.38
MD March  63.38(100%  .25)  63.38(.75)  $47.54
©2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
33
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Calculating the Selling Price of
Perishable Goods
perishable goods
• Products that have a certain shelf life and then no
value at all, such as fruits, vegetables, flowers, and
dairy products.
Selling price of
perishable goods
=
Total expected selling price
Total quantity – Anticipated spoilage
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a publicly accessible website, in whole or in part.
34
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Calculating the Selling Price of
Perishable Goods Example
A flower shop purchases 800 dozen roses at a cost of
$6.50 per dozen. If a 10% spoilage rate is anticipated,
at what selling price per dozen must the roses be sold
to achieve a 60% markup based on selling price?
Round answer to the nearest cent.
Selling price of
perishables
=
Total expected selling price
Total quantity – Anticipated spoilage
Cost  800  6.50  $5,200
SP 
Cost
5,200
5,200



100% - 60%
100% - % M SP
.4
$13,000
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a publicly accessible website, in whole or in part.
35
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Calculating the Selling Price of
Perishable Goods Example continued
Anticipated spoilage:
• Anticipated spoilage = Total quantity x Spoilage rate
• Anticipated spoilage = 800 x 10% = 800(.1) = 80 units
Selling price of
perishables
SPunit 
=
Total expected selling price
Total quantity – Anticipated spoilage
13,000
13,000

 $18.06 per dozen
720
800 - 80
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a publicly accessible website, in whole or in part.
36
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CHAPTER REVIEW PROBLEM 1
A jewelry store purchases watches for
$53.07. The selling price is $89.95. What is
the markup? What is the markup based on
cost?
M = SP – C = 89.95 – 53.07 = $36.88
%M COST 
M

C
36.88
 .6949  69.5%
53.07
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37
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CHAPTER REVIEW PROBLEM 2
A store purchases sofas for $328.25. If the store
policy is to mark up all merchandise 38% based on
selling price, what is the retail selling price of the
sofas?
C
SP 
100%  % M SP
SP 
328.25
328.25

 $529.44
100%  38%
.62
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a publicly accessible website, in whole or in part.
38
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CHAPTER REVIEW PROBLEM 3
In February, a pro shop purchased golf clubs for
$453.50 per set. The original markup was 35% based
on selling price.
In April, the shop took a 20% markdown by having a
special sale.
In May, the clubs were marked up 10%.
In June, it offered a sale of 15% off all merchandise.
In July, a final 10% markdown was taken on the clubs.
What was the final selling price of the golf clubs?
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a publicly accessible website, in whole or in part.
39
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CHAPTER REVIEW PROBLEM 3
SPOriginal 
C
100% - % M SP

continued
453.50
453.50

 $697.69
100% - 35%
.65
MD April  697.69(100%  20%)  697.69(.8)  $558.15
MU May  558.15(100%  10%)  558.15(1.1)  $613.97
MD June  613.97(100%  15%)  613.97(.85)  $521.87
MD July  521.87(100%  .1)  521.87(.9)  $469.68
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a publicly accessible website, in whole or in part.
40
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CHAPTER REVIEW PROBLEM 4
A market purchased 460 pounds of sweet potatoes at
$.76 per pound. If a 10% spoilage rate is anticipated,
at what price per pound should the sweet potatoes be
sold to achieve a 35% markup based on selling price?
Cost  460  .76  $349.60
Selling price of
perishables
=
Total expected selling price
Total quantity – Anticipated spoilage
Cost
349.60
349.60


 $537.85
SP 
100% - % M SP
100%  35%
.65
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a publicly accessible website, in whole or in part.
41
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CHAPTER REVIEW PROBLEM 4
continued
Anticipated spoilage:
• Anticipated spoilage = Total quantity x Spoilage rate
Anticipated spoilage = 460 x 10% = 460(.1) = 46
Selling price of
perishables
=
Total expected selling price
Total quantity – Anticipated spoilage
SP  $537.85
SPunit
537.85
537.85


 $1.30 per pound
460 - 46
414
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a publicly accessible website, in whole or in part.
42