(pg 3)

MARKON

Purpose:

Mark-on is the additional increase in the price of the commodity, done to achieve higher profits, due to
the increase in demand of the commodity during various seasons or holiday period. This strategy is used
by various manufacturers who produce goods that have a seasonal variation in demand.

Formula:

Mark on is equal to sales minus the cost of goods sold (COGS)

MO= Sales - COGS

MARKUP

Purpose:

Markup is the amount of money above their cost of a product or service that a business will charge for
that product or service.

Formula:

We define it as the difference between the initial cost (IC) and the selling price (SP).

Hence, we say,

MO = SP – IC

We could also solve markon by multiplying initial cost and the markon rate. The formula is given as
follows:

MO = IC * MOR

Where;

MO = markon

IC = initial cost

MARKDOWN

Purpose:

Markdown is a business math term that refers to a reduction of the original retail sales price in order to
increase sales. In other words, it is a process where the price list is permanently changed to a reduced
price. It is an amount by which you decrease the selling price. x

Formula:
A markdown is an amount by which you decrease the selling price. The amount that you decrease the
price by can be expressed as a percent of the selling price, known as the markdown rate. The selling
price would be determined using the equation: part = percent⋅whole.

Most markdown problems can be solved by the equation: Selling Price) = (1 - m)(Whole), where m is the
markdown rate, and the whole is the original price.

(pg 5)

The primary difference between a single trade discount and discount series is that there are more
conditions buyers must meet in a discount series to take full advantage of the reduction. In the single
discount formula, the calculation is pretty straightforward. For example, if the discount offered is 35
percent and the total value of the goods sold are Php100,000, the single discount formula would be:
Php100,000 x 35 percent = Php35,000 discount. In contrast to the single discount formula, however, the
discount series yields a lower discount. The effective 20/10/5 discount is found by applying each
discount successively. Using the previous example, the 20 percent discount reduces the Php100,000
owed to Php80,000; the 10 percent discount reduces the remaining Php80,000 to Php72,000; and the
five percent discount reduces the remaining Php72,000 owed to Php68,400, making the total discount
equal to Php31,600. As you can see, the discount series would be Php4,400 less than what was used
applying the single discount formula.

(pg 6 of 11)

Topic: Markup

Markup shows how much more a company's selling price is than the amount the item costs the
company. In general, the higher the markup, the more revenue a company makes. Markup is the retail
price for a product minus its cost, but the margin percentage is calculated differently. In our earlier
example, the markup is the same as gross profit (or $30), because the revenue was $100 and costs were
$70. However, markup percentage is shown as a percentage of costs, as opposed to a percentage of
revenue.

Using the same numbers as above, the markup percentage would be 42.9%, or ($100 in revenue – $70 in
costs) / $70 costs.

Topic: Margin

Profit margin refers to the revenue a company makes after paying COGS. The profit margin is calculated
by taking revenue minus the cost of goods sold. However, the difference is shown as a percentage of
revenue. The percentage of revenue that is gross profit is found by dividing the gross profit by revenue.
For example, if a company sells a product for $100 and it costs $70 to manufacture the product, its
margin is $30. The profit margin, stated as a percentage, is 30% (calculated as the margin divided by
sales).
Similarities (gitna ng circle)

Profit margin and markup are separate accounting terms that use the same inputs and analyze the same
transaction. Both profit margin and markup use revenue and costs as part of their calculations.

(pg 7)

1. It is used when cost of revenue was deducted from the revenue.

2. All of San Miguel’s cost of producing goods, operating expenses, non-operating expenses and
taxes are subtracted from their total revenue to arrive at the net income.
3.

INCOME:

Description: The term “income” generally refers to the amount of money, property, and other
transfers of value received over a set period of time by individuals or entities as compensation for
services, payment for products, returns on investments, pension distributions, gifts, and myriad
other transfer of value.

How to obtain: Understanding your expenses is the first step toward controlling them and increasing
your profit. You also need to understand your financials, hire the right people, set strategic plans,
add value to your customers and focus on innovation.

LOSS

Description: Loss of income refers to the situation in which a person's source of money for expenses
or lifestyle, such as salary from a job or income from a business, is terminated.

How to avoid: Creating realistic goals, and setting quota for your business can help minimize the
risks of losing. Also, get organized. Time is money, and there's no bigger drain on your time than
being disorganized. Provide amazing customer service. Implement effective marketing. Invest in
your staff. Get the price right.

II. Profit and Loss

Abrenzosa Company
Statement of Comprehensive Income
For the year ended 31/12/2021
Revenue
Sales Php25,000(125*Php200each)
Total Revenue Php25,000
Expenses and Losses
Cost of goods sold (goods + freight out) Php17,750
Advertising expense 900
Store Supplies 525
Total Expenses Php19,175
Net Income Php5,825

Supplementary exercise:

SP Cost MU MU cost % MU sp %

Php 200 100 100 100% 200%

299 135 164 121.48% 221.48%
600 244.9 355.1 145% 245%

Solve the problem below.

Answer: Markdown rate = 1 - (SP/OP) * 100
= 1 – (55/70) * 100
= 21.4%

Scaffold 3
Pricing Strategy
Considering a markup for the pricing strategy derived in scaffold 2,
Unit Cost = P2,033 / 10
= P203.3
Then, multiply unit cost by markup percentage which is suggested as 20%
Selling Price = P203.3 (203.3 *20%)
= P243.96 or P244

a. I used a cost-plus pricing strategy wherein; it is a basic strategy that works by considering the
total cost of making a product and adding a markup to that to determine the price of a product.
This is a good strategy in the long term. A business owner needs to first understand the costs
involved in production: material, labor, warehousing, machinery, utilities and such. The markup
price that is added to the top of production cost is what the company makes in profit.
b. Markup % is 20% based on cost. It supports my pricing objective as it is the basis for my pricing
strategy. Additionally, it generates a profit that will still be good in the long run considering a
stable market.