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[Music]

hi everyone this is teacher joanne of

math room

let me first ask you a question what is

the primary purpose

of operating a business you might be

thinking this answer

it is to generate profit majority of

those who engage their sales in business

want to earn money and in order to

achieve this goal of making money

each business sells their products or

provides their services

more than the cost to earn profit hence

to set the right price is important and

if you will engage yourself in business

you have to carefully study how to set

the right price

to avoid unnecessary errors that would

normally cost you a lot of money

it is important for you to keep accurate

records of

all costs that will aid you in

determining the selling price of your

product

or the price of service that you will be

providing

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to set the right price we need to

understand a very important concept

in business mathematics so this

video will cover this topic

a common business practice that enable

you to earn profit

and that is the concept of markup

so for this lesson the learning

objectives are the following

you should be able to define markup

illustrate how markup is obtained

differentiate markup from margins and

describe how gross margins

is used in sales to attain the learning

objectives

we need to answer the essential question

what

is the use of markup and how to solve

problems

related to it first

let us define markup

it is the amount of money added to the

cost to cover the operating expenses

and provide a profit to the business

aside from this concept here are the

other terms that we have to take note

first the selling price it is the price

at which the item is actually sold

next cost it refers to the price

that includes all the expenses in the

production of the product

and last we have the markup free it is a

percentage of the cost

to be added to determine the selling

price of the product

so how to determine the mark of value or

percentage

or how to set the selling price markup

percentage

varies greatly depending on the nature

of the business

there is no specific markup percentage

that applies to all

but there may be an average for a

particular business

and so these are some of the things that

need to be considered

first how much profit does the business

want

second how much does a business need to

offer all expenses

third how much the competitor sells

their product or services

fourth who are your target market and

fifth

for the service what quality of service

would you like to provide

always take note that the selling price

must be reasonable

competitive and suitable to its target

market

and will not make the business lose any

money

the markup depends on the industry but

for a wool sailor

or a distributor the average markup is

20

but it could be as low as 5 or as high

as 40

some even mark up their products up to

100

now how to compute for the markup

the computation for markup value can be

based on either cost or selling price

if the markup is based on cost the cost

is taken as hundred percent being the

base

or if the markup is based on selling

price the selling price

is taken as hundred percent being the

base

for some businesses costs may be the

more logical piece for calculating

markup

however calculating workup based on

selling price

is more advantageous method for many

retail stores

you will notice that the markup stated

in terms of selling price

as base is lower than markup based on

cost

this is the primary reason why traders

usually express their markup

based on selling price to make it appear

that they have a lower markup

or gross profit so here is the formula

in finding the selling price with markup

based on cost

first step markup is equivalent to the

product of markup rate times the cost

after that we have to get the selling

price which is equal to the cost plus

markup

and if you're looking for the markup

rate that is hundred

times selling price minus cost all over

cost

first problem finding the selling price

margin both bags for our store that cost

600 pesos each to make her desired

profit

margin must mark up each bag 32

on cost what must be the selling price

of the bank

to solve this problem first let us take

out the given values

it says here that the cost of each bag

is 600 pesos
and the markup value rate

is 32 or in decimal

0.32

following the formula in finding the

markup based on selling price

first mark up

is equivalent to the product of the

markup rate

and the cost

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so we have 0.32

times 600 is equivalent to 192.

step two we have to find the selling

price now

by getting the sum of the cost

and the markup

so we have 600 plus

192 this gives us

792 which is the value of the selling

price

this means the selling price of the bag

is 792 pesos

second problem finding the hose a pair

of running shoes

is marked up at 2100 which is 60

mark up based on cost what is the cost

of the shoes

here in this problem we are looking for

the cost of the running shoes

so based on our given problem we have

the selling price

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which is 2100

we also have the markup rate which is

given by

60

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in decimal 0.60

and to solve for this first we need to

look for the markup value

so mu is equal to mur times

the cost mu

is unknown mark up we have

0.63 cost is also unknown

for step 2 we have sp

is equal to the sum of the cost and the

markup

for the second price we have two

thousand landed

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for the foss it is unknown

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and for the markup value we have to

substitute the zero point

times c plus 0.60

c next let us simplify this so we have

2100

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equals 1c plus 0.60 c so we have 1.60 c

divide both sides by 1.6 t

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cancel this so we have a value of c

which is equivalent to 1312.50

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so it means to say that the cost of the

running shoes

is 1312.50

third let us find the markup rate a

laser printer costing 8750

is sold for 12 250. find the markup rate

based on cost so to answer this problem

first we have the cost

which is 8750

and the laser printing was sold at

the selling price of 12 250.

so to find the markup rate based on cost

what we need is first setting price

is equal to the cost plus markup

since we have the value of sp one twelve

thousand two hundred fifty

equals eight thousand seven hundred

fifty which is the cost

plus the mark up so here we have to

combine these two

so we have twelve thousand two hundred

fifty

minus 8750 equals

mu so here we have the value of

mu which is three thousand five hundred

second step after finding the mu we need

to find the markup rate

using the formula mu is equal to the mu

r times c so we already know the markup

value which is 3

5 the markup rate that's the unknown

times the c which is 8750

to find the mur we have to divide both

sides by

8750.

cancel 8700 so 3500

over 8750 the answer here

or the mur is equivalent to

0.4 or 40 percent

this means the markup rate based on cost

of the laser printing

is 40 next let us compute for the markup

based on the selling price step 1

markup is equal to markup rate times the

selling price

then step two cost is equal to selling

price

minus smartphone first let us find the

cost

what is the cost of an item that has a

selling price of 240

and a markup rate of 60 based on selling

price

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so based on this problem we have the

selling price

which is 240

the mark operate which is 60

which is equivalent to 0.6 first step

markup is equal to the markup rate

times the selling price

so here we have 0.6 p

times 2 4p gives us an answer of 144 as

the value of the markup

next cost is equal to

selling price minus the markup value

which is equal to 240 minus 144

so this gives us a value of cost which

is 96.

this means the cost of an item is 96

pesos next let us find the markup

based on the selling price jpd sports

incorporated

sells home gymnasium package for 175

000 and maintains a markup of 37

on selling price what is the markup

value

so here in this problem we have the

selling price which is 175 thousand

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markup rate which is 37 percent or

0.37

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so to solve for the markup this is equal

to

mur times the selling price

so we have 0.37

times 175 000

which is equivalent to 64 750

and this gives us the mark of value

so mean to say in this problem the

markup value of the home gym nation

package

is 64 750

now let us differentiate markup from

gross margin

a lot of people are confused with the

terms markup and gross margin

they sometimes use these terms

interchangeably

actually both terms are used to help

determine profitability

however they have different meaning so

now

let us go back to the definition of

markup markup is defined as the added

price to the product

to cover its cost and to earn profit

whereas when we say gross margin it is a

term that relates the markup

and the selling price now let us focus

on

gross margin when we say gross margin

it is also a percentage that presents

how much

the earned profit of a business based on

its revenue

it is a quick indicator of the profit

available to cover the cost

and to solve for the gross margin we

have markup

times the selling price minus cost all

over

the selling price take note that every

business

should monitor its gross margin to be

certain that the business has sufficient

amount of money

to cover all its expenses and it

provides profit

for the growth of the business let us

have an example

finding the gross margin a cosmetics

retailer

puts a store-wide markup of 40 on its

makeup products

if the cost of a lipstick is handed 50

pesos

compute for the gross margin and

interpret its value

so in this problem we have the host of

the lipstick which is 150

the markup rate which is 40

or 0.40 first

let us find the markup value so this

gives

us mur times the cost

so we have 0.40 times 150

which gives us a markup value of

60. next for the selling price

we have 150 which is a cost

plus the markup value which gives us

210.

so to find the cross margin we have the

markup

which is 60

over the selling price which is 210 and

this gives us a value of 28.57

percent what does this mean

this means that 28.57

of the selling price is your profit

now kindly try the following items to

answer this one

kindly pause the video

let's check our answer the horse of the

dvd

was 312.50

next item again you may pause the video

to answer this

let's check our work the answer here is

the rate of the markup

based on cost is 60 were you

able to answer the two problems if yes

great job

here are the important concepts they

have to take note

markup refers to the amount of money

added to the cost

to hover the operating expenses and

provide a profit to the business

gross margin on the other hand is a

percentage that presents how much to

earn profit of a business

based on its revenue and the compute for

the markup

may have based on cost and we also have

base on sacrifice

here is the end of our discussion i hope

you have learned a lot in this video

thanks for watching