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business math-buying and selling

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6.1 Mark Up

6.2 Conversion of

Mark Up Percent

6.3 Mark Down

6.4 Profit & Loss

Objectives

problems on

important factors in

managing a

business: buying

products and selling

products

6.1 Mark Up

Mark up – Introduction

An important principle in retail business is the

proper pricing of its merchandise.

Wrong pricing may lead to small profit or heavy

loss.

The cost price is the original price of the

merchandise paid by the retailer.

The retailer must add an additional amount

called the markup to its cost to cover its

business and to provide a profit.

6.1 Mark Up

Mark up – Definition

The sum of this cost and markup is the retail

(or selling) price.

In other words, markup (or gross profit or

gross margin) is the difference in the retail price

and cost price;

R=C+M

R = retail (selling) price

C = cost price

M = markup or gross profit

EXAMPLE: Retail/Selling Price

and he marked it up another P 89. What is the

selling price of the book?

Solution

Given: C = P 161 M = 89

R=C+M

=P161 + 89

= P 250

EXAMPLE: Retail/Selling Price

camcorder. If the markup is 19% on the cost,

find the retail price.

Solution

R = C + (C x MRc)

= 37,200 + (37,200 x 0.19)

= 37,200 + 7,068

= P44, 268

EXAMPLE: Markup Value

package for P 175, 000 and maintains a

markup of 37% on selling price. Find the

markup value

Solution

Msp = MRsp x R

= 0.37 x 175,000

= 64,750

EXAMPLE: Markup Value

water for P 49.50 and sells it for P 56.75. What

is his gross profit (markup)?

Solution

R=C+M

M = SP – C

56.75 – 49.50

7.25

EXAMPLE: Cost

P 4,792. It had been marked up P 1,248. What

was its cost?

Solution

SP = C + M

C = SP – M

= P4,792 - P1,248

= 3,544

EXAMPLE: Cost

8,021.50. The markup on it is 31.5% of the

cost. Find the cost.

Solution

C = SP/ (1 + MR)

= 8,021.50/ (1+0.315)

= 8,021.50/ 1.315

=6,100

EXAMPLE: Markup Rate

1. A laser printer costing P 8,750 is sold for P

12,250. Find the markup rate based on cost.

Solution

Given: C = 8,750

MRc = Mc/C

(SP – C) / C

= (12,250 – 8,750) / 8,750

= .40 or 40%

EXAMPLE: Markup Rate

2. A wall clock cost P 608.40 and sell for

P780. What is the percentage of markup

based on selling price?

Solution

Given: C = P608.40 SP = P789

MRsp = Msp / SP

(SP – C) / SP

= (780 – 608.40) / 780

= .22 or 22%

Exercises

If an item cost P 67.50 and is marked up

another P12.50, what would be the

selling price?

Solution P 80

A pair of rubber shoes costing P 3,490

has a markup rate of 62%. Find the retail

price.

Solution P 5,653.8

Exercises

If a merchandise costing P 4,290 is sold

for P 6,140, what is the markup rate?

Solution 43.12%

Find the markup on air-soft guns made

in Taiwan if the cost is P 5,700 and the

markup is 29% of selling price.

Solution

P 1,653

Exercises

If an electric flat iron was sells for P

944.64 and is marked up with 15.2% on

the cost. What is the cost?

Solution P 1,088.23

A wrist watch cost P 1, 476 is being sold

for P 3,600. Find the markup rate based

in cost

Solution

143.90%

6.3 Mark Down

Mark down – Definition

Markdown is a decrease in the selling

price.

It is the difference in the old retail price

and the new retail price; that is

MD = OP – NP

MD = mark down

OP = old retail price

NP = new retail price

6.3 Mark Down

Mark down – Percent

Prices sometimes are markdown due to

many reasons:

to face stiff competition

to encourage purchases in bulk

to dispose off old, damaged or obsolete

stocks

to close a line of merchandise.

EXAMPLE

1. What is the markdown and the sale price on

an antique jar that has a regular price of P

35,800 and is on sale for 26% off the

regular price

Solution

MD = RP X MDr SP = RP - MD

= P 35,800 x 0.26 = P 35,800 - P 9,308

= P 9,308 = P 26,492

EXAMPLE

3. If all the merchandise, with a selling price

of P7,800 is to be sold for P 6,474. Find the

markdown.

Solution

SP = RP - MD

MD = RP – SP

= P 7,800 - P6,474

= 1,326

EXAMPLE

4. Sofia has some shirt in her boutique that

have not been sold. She decided to mak

them down from P 850 to P 552.5, what

percentage did she mark them down?

Solution

MDr = MD/RP

(RP - SP) /RP

= (850 – 552.50)/850

=297.5/850

=0.35 or 35%

6.4 PROFIT & LOSS

Not all businesses make money.

A business incurs operating expenses, OE

such as: rents, lighting, wages,

commissions, bonus and other operating

expenses.

The markup must be able to cover the

operating expenses.

If markup is greater than operating

expenses, net profit is achieved.

However if markup is less than operating

expenses, loss is incurred.

6.4 PROFIT & LOSS

and the operating expenses, then it does

not make any profit nor incur any loss.

This price is called the breakeven price,

that is;

Breakeven price = cost price +

operating expenses

The earlier markup equation, now can be

expressed as follows;

Retail price = Cost + Net profit + Operating

expenses

OR R C NP OE

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