SECTION 16-1
Markup
Section Objective
Compute:
 markup
in dollars
Key Words to Know
cost
The actual amount paid for a product, as
opposed to its selling price, and which can
include expenses such as freight charges and
taxes.
Key Words to Know
selling price
What a product actually sells for in the store,
also called retail price.
markup
The difference between the cost of a product
and the selling price when the selling price is
higher.
Key Words to Know
gross profit
The amount of money a supplier makes on a
product when it sells it for more than cost.
net profit
Any money left after expenses have been
deducted from gross profits, also called net
income.
Formula
Markup = Selling Price – Cost
Do Now
Discount Electronics purchased TV/DVD sets
for $187.83 each.
Discount Electronics sells the TV/DVD sets
for $299.99 each.
What is the markup on each TV/DVD?
Do Now- Answer
Step: Find the markup.
Selling Price – Cost
$299.99 – $187.83 = $112.16
ASSIGNMENT
Workbook p.113
SECTION 16-2
Markup Rate
Section Objective
Calculate:
 markup
price
as a percent of the selling
Key Words to Know
markup rate
The markup on an item expressed
as a percent of its selling price.
Formula
Markup Rate = Markup ÷ Selling Price
Do Now
Roy’s Florist buys roses for $10.99 a
dozen.
It sells them for $18.95 a dozen.
What is the markup based on the selling
price?
Do Now Answer: Step 1
Find the markup.
Selling Price – Cost
$18.95 – $10.99 = $7.96
Do Now Answer: Step 2
Find the markup rate based on the
selling price.
Markup ÷ Selling Price
$7.96 ÷ $18.95 = 0.420 or 42%
Do Now 2
A ⅜-inch drill kit sells for $59.99.
The cost of the drill kit to the store
is $29.00.
Find the markup as a percent of the
selling price.
Do Now 2 Answer: Step 1
Find the markup.
Selling Price – Cost
$59.99 – $29.00 = $30.99
Example 2 Answer: Step 2
Find the markup as a percent of the
selling price.
Markup ÷ Selling Price
$30.99 ÷ $59.99 = 0.5165 or 51.2%
ASSIGNMENT
Workbook p.114
SECTION 16-3
Net Profit
Section Objective
Figure out:
 net
profit in dollars
Key Words to Know
operating expenses
The costs of running a business, such as
salaries, rent, utilities, and taxes, also
called overhead.
Formulas
How do I calculate overhead expenses?
Overhead = Selling Price × Overhead
Percent
How do I calculate the net profit?
Net Profit = Markup – Overhead
Do Now
Sport Shop purchases water tubes for
$44.98 each.
It sells the tubes for $89.99 each.
The owner estimates the overhead
expenses to be 40 percent of the selling
price of the merchandise.
What is the net profit on each tube?
Do Now Answer: Step 1
Find the markup.
Selling Price – Cost
$89.99 – $44.98 = $45.01
Do Now Answer: Step 2
Find the overhead.
Selling Price × Overhead Percent
$89.99 × 40% = $35.996 or $36.00
Do Now Answer: Step 3
Find the net profit.
Markup – Overhead
$45.01 – $36.00 = $9.01
Do Now 2
Anamarie’s Shoppe buys shirts at a cost
of $12.78. Anamarie’s sell the chemises at
a selling price of $24.49. Its management
estimates the overhead expenses to be 34
percent of the selling price of the
merchandise.
What is the net profit on each shirt sold?
Example 2 Answer: Step 1
Find the markup.
Selling Price – Cost
$24.49 – $12.78 = $11.71
Example 2 Answer: Step 2
Find the overhead.
Selling Price × Overhead Percent
$24.49 × 34% = $8.3266 or $8.33
Do Now 2 Answer: Step 2
Find the net profit.
Markup – Overhead
$11.71 – $8.33 = $3.38
SECTION 16-4
Net-Profit Rate
Section Objective
Find out:
 net
profit as a percent of the
selling price
Key Words to Know
net-profit rate
The net profit on an item expressed as a
percent of the selling price.
Formula
Net-Profit Rate = Net Profit ÷
Selling Price
Do Now
Giant Discounts sells a vacuum cleaner
for $49.99. The cost of the vacuum
cleaner to Giant Discounts is $23.74.
Giant estimates the overhead expenses
on the vacuum to be 30 percent of the
selling price.
What is the net-profit rate based on the
selling price of the vacuum cleaner?
Do Now Answer: Step 1
Find the net profit.
Markup – Overhead
($49.99 – $23.74) – ($49.99 × 30%)
$26.25 – $15.00 = $11.25
Do Now Answer: Step 2
Find the net-profit rate.
Net Profit ÷ Selling Price
$11.25 ÷ $49.99 = 0.2250 or 22.5%
Do Now 2
A robot transformer costs the Toy Store
$7.85.
It has a selling price of $16.96.
The store estimates overhead at 28 percent of
the selling price.
Find the net-profit rate based on the selling
price.
Do Now 2 Answer: Step 1
Find the net profit.
Markup – Overhead
($16.96 – $7.85) – ($16.96 × 28%)
$9.11 – $4.75 = $4.36
Do Now 2 Answer: Step 2
Find the net-profit rate.
Net Profit ÷ Selling Price
$4.36 ÷ $16.96 = 0.2570 or 25.7%
SECTION 16-5
Determining Selling Price—
Markup Based on Selling Price
Section Objective
Calculate:
 selling
price of an item based on
the cost and markup rate
Formula
Selling Price = Cost ÷ Complement of
Markup Rate
Do Now
VJ’s Sporting Goods Store aims for a
markup that is 40 percent of the selling
price of its merchandise.
The store received a shipment of
running shoes at a cost of $38.99 per
pair.
What is the minimum selling price the
store should charge?
Do Now (cont.)
Sales for Month: $42,000
Cost of goods sold
Percent of Total Sales
25,200
60%
Overhead expenses
8,400
20%
Profit
8,400
20%
TOTAL
$42,000
100%
(Note: Markup plus cost equals selling price. If the markup
is 40 percent of the selling price, then the cost must be 60
percent of the selling price. Sixty percent is the
complement of 40 percent.)
Do Now Answer: Step 1
Find the complement of the markup
rate.
100% – 40% = 60%
Do Now Answer: Step 2
Find the selling price.
Cost ÷ Complement of Markup
Rate
$38.99 ÷ 60% = $64.98
Do Now 2
Circuit Town purchased some
digital cordless phones for $31.99.
Its markup policy is 20 percent
based on the selling price.
What is the selling price of the
phones?
Example 2 Answer: Step 1
Find the complement of the
markup rate.
100% – 20% = 80%
Do Now 2 Answer: Step 2
Find the selling price.
Cost ÷ Complement of the Markup
Rate
$31.99 ÷ 80% = $39.99
ASSIGNMENT
Workbook p.115
SECTION 16-6
Markup Rate Based on Cost
Section Objective
Solve for:
 markup
rate based on cost
Formula
Markup Rate = Markup ÷ Cost
Do Now
The Table Co. purchases a dinette set for
$180 from the manufacturer.
It sells the set for $288.
What is the markup rate based on cost?
Do Now Answer: Step 1
Find the markup.
Selling Price – Cost
$288.00 – $180.00 = $108.00
Do Now Answer: Step 2
Find the markup rate based on
cost.
Markup ÷ Cost
$108.00 ÷ $180.00 = 0.6 or 60%
Do Now 2
Corner Drugs buys 16-oz tea for
$0.70 and sells it on sale for $0.77.
Find the markup rate based on
cost.
Do Now 2 Answer: Step 1
Find the markup.
Selling Price – Cost
$0.77 – $0.70 = $0.07
Do Now 2 Answer: Step 2
Find the markup rate based on
cost.
Markup ÷ Cost
$0.07 ÷ $0.70 = 0.1 or 10%
ASSIGNMENT
Workbook p.116
SECTION 16-7
Determining Selling Price—
Markup Based on Cost
Section Objective
Compute:
 selling
price based on cost
 markup
rate
Formulas
How do I calculate the markup?
Markup = Cost × Markup Rate
How do I calculate the selling price?
Selling Price = Cost + Markup
Do Now 1
Wholesale Jewelers sells watches to
jewelry stores for $18.45 each. Wholesale
Jewelers calculates the suggested retail
price and attaches it to each watch. The
retail price is computed by marking up
the cost to the jewelry store by 160
percent of the cost.
What is the suggested retail selling
price?
Do Now 1 Answer: Step 1
Find the markup.
Cost × Markup Rate
$18.45 × 160% = $29.52
Do Now 1 Answer: Step 2
Find the selling price.
Cost + Markup
$18.45 + $29.52 = $47.97
Do Now 2
Florida Nursery Stock sells hanging
baskets to retail outlets at a cost of $2.58.
Most of the outlets mark up hanging
baskets at 150 percent of cost.
What selling price do most outlets put on
the hanging baskets?
Do Now 2 Answer: Step 1
Find the markup.
Cost × Markup Rate
$2.58 × 150% = $3.87
Do Now 2 Answer: Step 2
Find the selling price.
Cost + Markup
$2.58 + $3.87 = $6.45
SECTION 16-8
Markdown
Section Objective
Calculate:
 markdown
 markdown
in dollars
as a percent of the
regular selling price
Key Words to Know
markdown
The difference between the regular
selling price of an item and its sale price,
or the amount of the discount.
markdown rate
The discount on an item expressed as a
percent of its regular selling price, such
as 20 percent.
Formulas
How do I calculate the markdown?
Markdown = Regular Selling Price – Sale
Price
How do I calculate the markdown rate?
Markdown Rate = Markdown ÷ Regular Selling
Price
Do Now 1
Ski’s Sport Shop sells cross-country
skis at a regular selling price of
$98.49.
For one week only, Ski’s has
marked down the price to $68.94.
What is the markdown rate?
Do Now 1 Answer: Step 2
Find the markdown rate.
Markdown ÷ Regular Selling
Price
$29.55 ÷ $98.49 = 0.3000 or 30%
Do Now 1 Answer: Step 1
Find the markdown.
Regular Selling Price – Sale
Price
$98.49 – $68.94 = $29.55
Do Now 2
Diamond Connection has marked
down diamond heart necklaces
from $49.99 to $39.99.
What is the markdown and the
markdown rate?
Do Now 2 Answer: Step 1
Find the markdown.
Regular Selling Price – Sale Price
$49.99 – $39.99 = $10.00
Do Now 2 Answer: Step 2
Find the markdown rate.
Markdown ÷ Regular Selling
Price
$10.00 ÷ $49.99 = $0.2000 or 20.0%
ASSIGNMENT
Workbook p.117