Chapter 27
pricing math
Section 27.1
Calculating Prices
Section 27.2
Calculating Discounts
Section 27.1
Calculating Prices
CONNECT Why is setting a price an important
part of the marketing mix?
Section 27.1
Calculating Prices
• Explain how a company’s profit is related to markup.
• Use the basic formula for calculating a retail price.
• Calculate dollar and percentage markup based on cost or retail.
• Calculate markdowns in dollars and percentages.
• Calculate maintained markup in dollars and percentages.
Section 27.1
Calculating Prices
Pricing and profit have a direct relationship to
each other. Retailers use different pricing
formulas for calculating prices, markups, and
markdowns.
Section 27.1
Calculating Prices
• gross profit
• maintained markup
Section 27.1
Calculating Prices
Identify the Formula for Calculating a Retail Price in the
Middle Circle. Use Outer Circles to Note Other Formulas
Section 27.1
Calculating Prices
Identify the Formula for Calculating a Retail Price in the
Middle Circle. Use Outer Circles to Note Other Formulas
Section 27.1
Calculating Prices
Profit and Markup
The markup (margin) on an item
is the same as gross profit.
gross profit
The difference between sales revenue
and the cost of goods sold.
Section 27.1
Calculating Prices
Profit and Markup
Goals of Pricing
Section 27.1
Calculating Prices
Profit and Markup
Goals of Pricing
Section 27.1
Calculating Prices
Profit and Markup
Three Basic Ways to Perform Markup
Section 27.1
Calculating Prices
Profit and Markup
Three Basic Ways to Perform Markup
Section 27.1
Calculating Prices
Profit and Markup
Calculate Percentage Markup on Retail
Section 27.1
Calculating Prices
Profit and Markup
Calculate Percentage Markup on Retail
Section 27.1
Calculating Prices
Profit and Markup
Calculate Percentage
Markup on Cost
Section 27.1
Calculating Prices
Profit and Markup
Calculate Percentage
Markup on Cost
Section 27.1
Calculating Prices
Profit and Markup
The Cost Method
of Pricing
Section 27.1
Calculating Prices
Profit and Markup
The Cost Method
of Pricing
Section 27.1
Calculating Prices
Profit and Markup
Convert the Markup on
Retail to the Markup on
Cost and Apply it to the
Cost of an Item
Section 27.1
Calculating Prices
Profit and Markup
Convert the Markup on
Retail to the Markup on
Cost and Apply it to the
Cost of an Item
Section 27.1
Calculating Prices
Profit and Markup
A Second Method of
Calculating the Retail
Price from the Cost and
the Markup on Retail
Section 27.1
Calculating Prices
Profit and Markup
A Second Method of
Calculating the Retail
Price from the Cost and
the Markup on Retail
Section 27.1
Calculating Prices
Calculations for Lowering Prices
Lowering Prices
Section 27.1
Calculating Prices
Calculations for Lowering Prices
What is maintained markup?
maintained markup
The difference between an item’s final
sale price and its cost.
Section 27.1
Calculating Prices
Calculations for Lowering Prices
Steps to
Determining
Maintained Markup
Section 27.1
Calculating Prices
Calculations for Lowering Prices
Steps to
Determining
Maintained Markup
Section 27.1
Calculating Prices
Section 27.1
1.
Discuss why retailers prefer to use markup percent based on
the retail price instead of the markup percent on cost.
Retailers prefer markup percent based on retail price because the
markup on retail price sounds like a smaller amount and makes the
price seem more reasonable to the consumer. Future markdowns and
discounts are calculated on a retail basis. Profits are generally
calculated on sales revenue.
Section 27.1
Calculating Prices
Section 27.1
2.
Identify when the markup equivalents chart is used to
calculate retail prices.
The markup equivalents chart is used to calculate retail prices when
you know the cost and you know the percent of markup you want
based on retail price.
Section 27.1
Calculating Prices
Section 27.1
3.
Explain when the initial markup is the same as the maintained
markup.
When no markdowns are taken, the initial markup and maintained
markup are the same.
Section 27.2
Calculating Discounts
CONNECT What was the last discounted item
you purchased?
Section 27.2
Calculating Discounts
• Utilize a general procedure for figuring discounts and net prices.
• Calculate discounts in dollars and percentages.
• Calculate net amount.
Section 27.2
Calculating Discounts
Discounts affect the final price a customer will
pay. It is essential to learn how to calculate
discounts and the net price payable.
Section 27.2
Calculating Discounts
• employee discounts
Section 27.2
Calculating Discounts
Procedures for Calculating Discounts, the Net Amount
Payable, and Examples of Discounts Offered by
Employers and Vendors
Section 27.2
Calculating Discounts
Procedures for Calculating Discounts, the Net Amount
Payable, and Examples of Discounts Offered by
Employers and Vendors
Section 27.2
Calculating Discounts
Discounts
How to Calculate a
Discount in Dollars Along
with an Item’s Net Price
Section 27.2
Calculating Discounts
Discounts
How to Calculate a
Discount in Dollars Along
with an Item’s Net Price
Section 27.2
Calculating Discounts
Discounts
Employee discounts can range
from 10 percent to 30 percent for
entry-level employees.
employee discount
A discount offered to workers by their employers.
Section 27.2
Calculating Discounts
Discounts
Types of Discounts
Section 27.2
Calculating Discounts
Discounts
Types of Discounts
Section 27.2
Calculating Discounts
Discounts
How to Calculate a Trade
Discount Based on a Series
Section 27.2
Calculating Discounts
Discounts
How to Calculate a Trade
Discount Based on a Series
Section 27.2
Calculating Discounts
Discounts
Quantity Discounts
No. of items
1–24
25–48
49–72
Unit Price
$0.95
$0.90
$0.85
Section 27.2
Calculating Discounts
Discounts
Promotional Discounts
STEP 1 Divide the dollar discount by the original price. The answer will
be a decimal.
D($) divided by P = D(%)
$250 ÷ $10,000 = .025
STEP 2 Change the decimal to a percentage by shifting the decimal point
two places to the right. This figure is the percentage discount. When
necessary, round the percentage to the tenths place.
.025 = 2.5%
Section 27.2
Calculating Discounts
Discounts
Potential Pitfalls of Discount Pricing
Frequent sales can numb customer response.
Some businesses have to offer very deep discounts to
see an increase in traffic.
Price promotions may set a precedent.
Poorly planned discounts can lead to price wars.
Section 27.2
Calculating Discounts
Section 27.2
1.
Explain why employers offer employee discounts.
Offering discounts encourages employees to buy and use the products
in the hope that they will then project confidence in the products and
enthusiasm when selling those products.
Section 27.2
Calculating Discounts
Section 27.2
2.
Identify what the number “3” represents in invoice terms 3/10, net 45.
The number “3” indicates that the buyer will receive a 3 percent
discount if the invoice is paid within 10 days.
Section 27.2
Calculating Discounts
Section 27.2
3.
Discuss why vendors offer seasonal discounts.
Vendors offer seasonal discounts to encourage buyers to purchase
goods long before the consumer buying season.
End of
Chapter 27
pricing math
Section 27.1
Calculating Prices
Section 27.2
Calculating Discounts