You are on page 1of 22

CHAPTER 6 :

MARK UP & MARK DOWN


6.1 Mark Up
6.2 Conversion of
Mark Up Percent
6.3 Mark Down
6.4 Profit & Loss
Objectives

Analyze and solve


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

1. A math book cost the store manager P 161


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

2. AUS Electronics pays P 37,200 for a digital


camcorder. If the markup is 19% on the cost,
find the retail price.
Solution

Given: C = P37,200 MRsp = 0.19

R = C + (C x MRc)
= 37,200 + (37,200 x 0.19)
= 37,200 + 7,068
= P44, 268
EXAMPLE: Markup Value

1. RFS Sports Inc. sells home-gymnasium


package for P 175, 000 and maintains a
markup of 37% on selling price. Find the
markup value
Solution

Given: R = P 175,000 MRsp = 0.37

Msp = MRsp x R
= 0.37 x 175,000
= 64,750
EXAMPLE: Markup Value

2. The grocer purchase a gallon of mineral


water for P 49.50 and sells it for P 56.75. What
is his gross profit (markup)?

Solution

Given: R = P 56.75 C = 49.50

R=C+M
M = SP – C
56.75 – 49.50
7.25
EXAMPLE: Cost

1. The washing machine has a selling price of


P 4,792. It had been marked up P 1,248. What
was its cost?

Solution

Given: SP = P4,792 M = P1,248


SP = C + M
C = SP – M
= P4,792 - P1,248
= 3,544
EXAMPLE: Cost

2. A hot-and-cold water dispenser sells for P


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

Solution

Given: SP = P 8,021.50 MR = 0.315


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

Given: Regular Price = P 35,800 Markdown Rate = 0.26

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

Given: Regular Price = P7,800 Sale Price = P6,474

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

Given: Regular Price = P850 Sale Price =P 552.50


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

If the retail price just covers the cost price


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