Lesson Objective

At the end of this lesson, the students should be able to:

1. Define cost, initial markup or mark-on, additional markup, markup
cancellation, and markdown;
2. Differentiate markup and margin;
3. Compute for markup based on cost;
4. Compute for markup based on selling price; and
5. Convert markup base on cost to markup based on selling price
and vice versa.
In pricing the company should set the price at a level where it can
absorb all expenses without resulting into a loss but it can give you
profit; not to high where customers may not able to afford it, not too
low where company cannot anymore generate profit.

Costs.................................................₱xxx.xx
Plus: Initial Mark-up......................... ₱ xx
Original Selling Price........................₱xxx.xx
Additional Mark-up – is the amount added to the original selling price to
arrive at the new Selling price.

Original Selling Price.......................₱xxx.xx

Plus: Additional Mark-up.................₱ xx.xx
New Original Selling Price..............₱xxx.xx

Mark-up Cancellation- the decrease in the selling price that does not
decrease it below selling price

New Selling Price.............................₱xxx.xx

Less: Mark-up Cancellation............₱xx.xx
Reduced Selling Price.....................₱xxx.xx
Markdown- reduction in the original selling price.

Original Selling Price.......................₱xxx.xx

Less: Markdown...............................₱ xx.xx
New Reduced Selling Price............₱xxx.xx
Margin- the sales less costs of goods sold. This is the mark-up based
on sales or selling price.
Mark-up- the amount by which the cost of a product is increased in
order to derive at the selling price. This the mark-up based on cost
The difference between margin and mark-up is the where the profit
relates, if it relates to sales then its margin; if it relates to costs then
its mark-up. From the relationship there from we can say that Margin
is directly related to sales whereas Mark-up has a direct relationship
to costs.
Mark-up based on Cost &Mark-up based on Selling
Price(Margin)

Converting Mark-up based on Costs to Mark-up Based on Selling

Price and Vice Versa.
Converting Mark-up based on Costs to Mark-up Based on Selling Price
Converting Mark-up based on Selling Price to Mark-up Based on Costs

Markdown
Mark down = Old selling price – New Selling Price
Profit or Loss
Sales: the amount sold
Cost of sales/Costs of goods sold
Expenses incurred in buying of
goods including purchase price
itself.

Gross profit/gross margin

the difference between sales
and cost of sales
These expenses are incurred to
run a business.

These are incidental income of

the business

the result of the operation for a

certain period.
Break-even point an Overview
Break-even point is the point where business makes neither profit nor
loss.
Find the break-even point in units and in peso given that the unit
price of a certain commodity is ₱15.00; variable cost,₱5; and total fixed
cost, ₱12,000
A company’s variable cost per unit is ₱7.00 and total fixed cost at
₱9,000.00 if the company sold a total of 10,000 units yielding total sales
₱150,000, find the BEP in units and BEP in peso
Trade Discounts & Cash Discounts
Trade Discounts are a reduction from list price granted to buyers.
Trade discounts could either be a single discount or a series of
discount.
Cash Discounts are recorded in the accounting records either sales
discounts in the books of the seller or purchase discounts in the
books of the buyer.
The difference between Trade and Cash discounts is a matter of
recording. Trade discounts are deducted to the lists price to arrive at
the Purchase price or sales price they are not reflected in the books
since they usually occur to entice buyer for bulk orders, meanwhile
cash discounts are a mechanism for early payment.
Single Discount
P = BR Where: P-is the discount; B is the List Price and R is the
Discount rate.

Series Discounts

Method 1. Multiply the list price by the list price by the first discount
rate. The next discount rate is then applied on the difference between
the list price and the first discount to get the second discount. We then
deduct the second discount from the said difference. We continue with
the same process depending on the number of the discount in the
series.
Method 2. Deduct the first discount rate from 100% and multiply the list
price by the rate obtained. Deduct the series of discount rate from
100% and multiply the first balance obtained by the second balance
rate obtained.

Method 3. Convert the series of discounts to a single equivalent rate.

To do so, we first multiply the resulting products by themselves to give
us the NIP rate. If we multiply the NIP rate by the lists price, we get the
net invoice price. Deducting the net invoice price from the lists price will
give us the single equivalent discount. Alternatively, we deduct from
100% to get the single equivalent discount rate. This single equivalent
rate is then multiplied with the list price to get the discount. When we
deduct the discount from the list price, we get the net invoice price.
Terms of Sale or Purchase

Computing for Discount Period and Credit Period

Computing for Cash Discount
Lesson 5: Simple Interest

Learning Objectives:
1. Explain the role interest plays in a loan transaction;
2. Compute the interest due on loan;
3. Find the maturity value on a loan or the future value on
invested capital;
4. Differentiate ordinary interest and exact interest, and be able to
compute for the same;
5. Compute for the actual time and approximate time
6. Use the knowledge in (4) and (5), and compute for the four
different types of simple interest;
7. Explain the concept of promissory note
Lesson 6 Mortgages

At the end of this lesson, the students should be able to;

a. Comprehend what is mortgage
b. Compute for the down payment on a mortgage and the amount of the mortgage
loan;
c. Determine how payment is applied to interest and principal, and determine the
balance of the loan after each payment;
d. Prepare an amortization table; and
e. Solve problems involving mortgages.
Lesson Summary
• Sales agents and brokers are generally paid commissions as incentives for
increasing a firms sales. Some of these sales agents or brokers are paid solely
through commission or what is termed as plain commission. Their gross
earnings would be their total commission.
• Other sales agents and brokers are paid basic salary plus commission. Their
gross earnings would be their basic pay plus commission plus override.
• Marketing and/or product managers are generally paid overrides on the
sales of people under them. For these people, gross earnings will be their
basic pay plus commission plus override.
• In certain cases, managers and sales persons are given transportation
allowance and/or representation allowance. Just remember that any
allowance given a person is in addition to the basic salary, commission, and
override that he or she is entitled to.
• If the sales are on installment basis, companies do not give commission
based on sales. Rather, they are given commission based on collection, that
is payment made by buyers.