A.

MARK-UP AND DISCOUNT

Buying and selling are the essential functions of a trading concern. Manufactures or procedures buy raw
materials or parts to produce finished products. A trading concern tries to buy merchandise at the lowest
possible cost in order to maximize its profits. In a trading business, the trader or the buyer should determine the
goods needed by the costumer and the price the costumers are willing to pay for the goods. He should know
where to obtain the goods at the lowest price to minimize cost and maximize profit. If the buyer miscalculate
the demand for the goods, he will be stuck with goods he has paid for and cannot sell. This holds true also with
a manufacturer.

Discount in a commercial transaction refer to a reduction in the cost of bill of goods in return for prompt
payment in place of an allowable deferred payment. Discounts are usually expressed as a percent of the selling
price. Discounts are often given for 1.) volume sales, 2.) cash payments, 3.) paying in a specific time, and 4) to
promote sales.

Amount of Discount = Percent Discount X Regular Price

Discount Price = Regular Price – Amount of Discount

Exercise #1
A store advertises “all prices slashed 15%. Friday through Sunday.” How much would you pay for a
sewing machine regularly priced at P4,530.00.

Solution:
Amount of Discount = Percent Discount X Regular Price
= (0.15)(4, 530.00)
= P679.50

Discount Price = Regular Price – Amount of Discount

= P4,530.00 – P679.50
= P3,850.50

Exercise #2:
Joey bought a pair of shoes for P1,200.00 at a 20% discount. What was the original price of the shoes?

Solution:
Given P1,200.00 ------------Sale price
---------------80% of original price

B = P/R
= 1,200/0.8
= P1,500

Checking:
P = BR
= P1,200.00(0.8)
= P1,200.00

MARK-UP adding a certain amount to the original price.

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 Amount of Mark-up = Percent Markup X Cost

Selling Price = Cost + Amount of Mark up

Example:
If a business man pays P750.00 for an item, what is the selling price of the item if it is marked up 40%?

Solution:
Amount of Mark up = Percent mark up X cost
= (.4)(7.50)
= P300.00

Selling Price = Cost + Amount of Mark up

= P750.00 + P300.00
= P1,050.00

A. COMMISSION (Brokerage)
Is the amount of money earned by a person, called an agent for selling a product or providing a service
to another person. The amount remaining after the commission has been deducted from the gross sales is
referred to as the net proceeds or net sales. The rate of commission is a percent of the total value of the
products or service.

Types of Commission
1. Straight Commission – the salesman, usually a free lancer, does not receive a fixed monthly rate or a
bonus for exceeding his regular sales. His income is derived solely from commission earned from sales.
2. Salary Plus Commission – the salesman is given a basic salary plus an additional commission for all
the sales he made.
3. Salary Plus Bonus – (salary-bonus plan) a salesman is given a basic salary plus a bonus excess of the
quota requirement. The excess in the requirement quota is given a certain percent. Even if he does not
reach the quota, he is still given his basic salary.
4. Graduated Commission – is the sales commission increases the rate of commission also increase. This
plan does not provided any basic pay instead a graduated scale pf percent based on sales or collection is
given to the salesman. The total sales or collection is subdivided into graduated and each level has its
corresponding rate of commission.
5. Override Commission – commission earned from the sales of the representatives.

Commission = Rate of Commission X Scale

B. SIMPLE INTEREST
Money borrowed usually bears a cost called interest. The amount borrows is called principal.
In business transaction, interest may defined in two ways:
1. To an investor, interest is derived from an invested capital.
2. To a debtor, interest is money paid as rental for the use of money.

INTEREST = Principal X Rate X Time

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 Prt

Where:
I = the amount of interest
P = principal (the amount of the money borrowed)
r = the rate at which the interest is to be paid.
t = length of time the debt/loam has to be paid

In the simple interest formula:

1. With a yearly rate, the time must be expressed in years
2. With a monthly rate, the time must be expressed in months
3. With a daily rate, the time must be expressed in days.

Principal
Refers to the capital originally invested in a business transaction. To find the amount at the end of the term,
simply add the principal and the interest earned, that is:

A=P+I
Where:
A = the total amount at the end of the term
P = the principal
I = the amount of interest
Since, I = Prt, then we have
A =P+I
= P + Prt
= P (1 + rt)
Example:

Julius Ignacio borrowed from Rj Ferdinand Bulatao an amount of P20,000.00 at an interest rate of 18%.
How much should Julius Ignacio pay after 1 year?

Solution:
Given
P = P20,000.00 I = Prt A = P+I
r =18% = 20,000.00(0.18)(1) = 20,000.00+3,600.00

t = 1 year = 3,600.00 = 23,600.00

Another solution:
A = P(1+rt) Thus , I = A-P
= 20,000.00(1+0.18X1) = 23,000.00-20,000
= 20,000.00(1.18) = 3,600.00
= 23,600.00

AMOUNT is sometimes referred to as the “Full Amount’’ which is the principal and the interest due at
any time after investment of the principal. Other word such as SUM is also used instead of AMOUNT if is
colloquially met.
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 ORDINARY AND EXACT INTEREST

*If the given time is in days, two varieties of simple interest are used.

1. Ordinary Interest- where all months of the year are considered as having equal number of 30 days a
year.
2. Exact Interest- where a year has exactly 365 days.

When the term of investment is in he days the following formula shall be used;

Ordinary Interest t = no. of days/360, I=Pr/360

Exact Interest t = no. of days/365, I=Pr/365

Example:
1. Find the yearly interest of P1,000.00 when the amount percentage rate is 9% for a period of 3 years.

Solution:
I = Prt
= (P1000.00)(0.09)(3 years)
= P270.00

2. A student borrows P1,800.00 from the government at 7% APR to pay his school expenses. If he aggress to
pay it back at the end of 5 years. What will the interest be?

Solution:
I = Prt
= (P1,800.00)(0.07)(5 years)
= P680.00

3. Find the ordinary and the exact interest at 8% on P3,500.00 and the corresponding amounts at the end of 75
days.

Solution:
Ordinary Interest = 3,500(0.06)(75/360)
= P43.75

Exact Interest = 3,500.(0.06)(75/365)

= P43.15

C. COMPOUND INTEREST

In a loan and savings transactions, Interest arrangements maybe simple and compounded. In the former,
the periodic interest is based only on the original principal. In the latter, the periodic uncollected interest are
added to the principal and their sum is the basis of the interest for the succeeding interest period. When
earning is added to the principal at regular intervals and the sum becomes a new principal, the interest is
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 said to be compounded. The total amount is called compound amount. The difference between the
compound amount and the original principal is called compound interest. The interest may be compounded
annually, semi-annually, quarterly or monthly.

Example:
1. If P2,000 is deposited at 8% compounded quarterly, how much interest
will it earn at the end of 1 year?
Solutions:
Given: P = P2,000
r = 8%
t = quarterly( 3 months = 1 quarter ) = 3/12 = 0.25

First quarter: 2,000 x 0.08 x 0.25 = 40.00

New Balance: 2,000 + 40 = 2,040.00

Second quarter: 2,040 x 0.08 x 0.25 = 40.80

New balance: 2,040 + 40.80 = 2,040.00

Third quarter: 2,080.80 x 0.08 x 0.25 = 41.62

New Balance: 2,122.42 + 41.62 = 2,122.42

Fourth Quarter: 2,122.42 x 0.08 x 0.25 = 42.65

New Balance: 2,122.42 + 42.65 = 2,164.87

Thus, the compounded interest earned after 1 year is P2,164.87 – 2,000 = P164.87

Another Method:
The compound interest formula can be used to solve the problem above.

A = P(1+r)n

Where:
A = total amount due at the end of the period
P = principal amount
r = rate of interest
n = number of interest period
Note :
*Annually means one paying period in 1 year
*Semi-annually means two paying periods in 1 year
*Quarterly means four paying periods in 1 year
*Monthly means 12 paying periods in 1 year

Therefore, from problem above, we have:

A = 2,000 x (1+0.08/4)4
= 2,000 x (1.02)4
= 2,000 x (1.0824)
= 2,164.8

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 Hence, the compound interest is given by P2,164.8 – P2,000 = P164.8

Taxes are compulsory payments of income property value etc. levied for the support of a government.

Sales tax is a fixed percent of the cost of the goods a person buys.

Sales Tax = price x rate

Example
Joey bought a new car consisting of P685,000. calculate the sale tax if the tax is 6%
Solution:
Sales Tax = price x rate
= 685,000 x 0.06
= P41,100

Property tax is a tax on the value of a person’s real property

Property Tax = assessed Value x rate

Example:
Compute the property tax on a lot having as assessed value of P135,250 if the property tax rate is 4%..
Solution:
Property tax = assessed Value x rate
= P135,250 x 0.04
= P5,410

Assessed Value is an estimated value that a country/locality sets on property for the purpose of taxation. It
is usually a fixed percent of the property’s full market value.

Example
If the assessed value is 25% of the full market value, what is the assessed value of a lot worth P54,100?
Solution:
Assessed Value = 54,100 x 0.25
= 13,525

Activity
1. If a wallet sells for Php30 and has a markup of Php18, what is the cost of the item?
Find: Cost
2. Jenny buys a bike for Php12 and sells it in “The Bazaar” for Php18.  Find the percent of markup based on cost.

3. Pamela’s cupcakes cost Php10 a box.  If the cupcakes is sold for Php16, what is the percent of markup
based on cost?
4. What is the selling price for a cassette that costs the retailer Php10.00 and is marked up 70% based on cost?
5. Find the cost of pants which has been marked up Php9 and has a markup rate of 80%.
6. A computer software retailer used a markup rate of 40%. Find the selling. price of a computer game that cost the
retailer Php 250.
7. An expensive cropped top originally priced at Php 550 is marked 25% off.     
          What is the sale price?
8. A golf shop pays its wholesaler Php 4000 for a certain club, and then sells it to a golfer for Php 5300. What is the
markup rate?
9. A Gibson guitar is marked down by 20%; the sale price is Php 28,000.  What was the original price?
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 10. An item from Bershka that regularly sells for Php 3000 a piece and sells it for Php 8100 for 3 items. What is the
discount rate from the original total cost?
11. A retail shop posts a sale for 20% in all items. Find the sale price of the shop's graphic shirt that costs Php 350?
12. . A collectible item that originally priced at Php 18,500 was sold for Ph 12,000 due to damage. Find the markdown rate.
13. The shop's overall sales for 2014 was Php 2,500,000 and flunk by    15% this year. What is the overall sales for this
year?
14. Bikna bought 3 items for H&M's 25% markdown sale. She bought a scarf with the original price of Php 450, also a
jacket pullover cost Php 1200, and a pair of boots was originally priced at Php 2500. Find the selling price of each
purchased items.
15. Japan Home had a grand sale last week. With all their items priced a P88, how much would the discounted price be if
their items were all 30% off?
16. An old book was marked down by 43% and sold for Php 20,000. How much was the original value of the book?
17. An author released the last book of a trilogy he created. If bought   individually, the first book would cost Php 230, the
second book for Php 370, and the last book for Php 400. The author then decided  create a promo for those who want
to buy the trilogy all at once. If the   author sold the trilogy at Php 750, find:
A.) Total cost of all books if bought individually
B.) Discount acquired if the trilogy was bought
18. A man bought a set of original jewelry for Php 287,000. The value of the jewelry set increases by 40% per annum. A
year after, the man decides to sell the jewelry due to financial reasons. How much can he sell the jewelry set?
19. A benefit concert will be held during Christmas Eve for the benefit of the victims of the Lumad killings. The early bird
ticket will be priced at Php 200 for both adults and children. The organizers decided that the door charge will increase
by 30% for adults and 20% for children. How much are the new prices of both tickets per person combined?
20. . A bakery near UST has a daily closing time sale. All of their pastries are being sold at 70% off. Supposed that Juan
wants to buy a donut at Php 20 each, a cupcake at Php 50 each, and macarons at Php 150 per box during closing time
sale, how much will Juan pay?

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