RETAIL BUYING MATH

PRACTICE
MARKUP PERCENT

An item cost a retailer $25.00. If it sold for

$90.00, what was the markup percentage?

- Markup must cover all operating expenses for a department + reasonable profit

- Markup varies by classification or department

FORMULA FOR MARKUP PERCENTAGE:

Markup Percent = (Retail – Cost)/ Retail

Or
(Cost/Retail) – 1

Solution: ($90 - $25)/$90 = 72.2%

CALCULATING COST AND RETAIL WHEN
MARKUP IS KNOWN
Solving for cost = Retail X (100% - MU%)
A buyer needs to sell a top for $90.00 and the planned markup is 72%. What is the
maximum cost that the buyer can pay for the item?
$90.00 X (100% - 72%)
$90.00 X .28 = $25.20

Solving for retail = Cost / (100% - MU%)

If a vendor charges the buyer $25.20 for the top and the markup plan is 72%, what price
will the buyer retail the item for?
$25.20/(100% - 72%)
$25.20 / .28 = $90.00
CUMULATIVE MARKUP PERCENT

• Markup achieved on all merchandise available for sale during a given period
• Inventory O/H + Purchases

How can a buyer change their strategy

when their financial goals are not being
met?
CUMULATIVE MARKUP PERCENT

• The opening inventory for the boy’s department on March 1 was

$150,000 at cost and $260,000 at retail. During the month, the
department received merchandise that cost $95,000 with a 45.5%
markup. Find the cumulative markup.
CUMULATIVE MARKUP PERCENT
SALES VS. PLAN VS. LY

•  Compare actual sales performance to plan, comp and LY

Last year, the men’s clothing department had sales of $248,936. This year sales
were $256,782. What was the percent increase in sales?
SALES VS. PLAN VS. LY

($256,782-$248,936)/$248,936 =
3.15% increase
CALCULATING PERCENT INCREASE

• If last year’s actual sales were $2,000,000 and this year's planned sales are $2,200,000
what is the percentage of sales increase?
• If last year's seasonal sales are $2,000,000 and there was a planned 10% sales increase,
what are the seasonal planned sales for this year?
MARKDOWNS

• Means of promoting and increasing sales - IMPACT ?

• Markdowns reduce the value of inventory
• First markdown is your least costly and most profitable
• What are the two types of markdowns?

A buyer reduces 93 calculators from $15 to $10. What is the total markdown in dollars?
MARKDOWNS

Solution:
Original or present retail $15
- New retail - $10
= Markdown $ = $5 per piece

Total markdown $ = $5 markdown x 93 pieces

Total markdown $ = $465
MARKDOWNS

A store advertises 25% off on a group of 50 chairs

currently retailed at $100 each. What is the total
dollar markdown?
Solution:

Percentage off = 25% x $100 Retail

Markdown $ = $25 per chair
Total markdown $ = $25 markdown x 50 pieces
Total markdown $ = $1,250
A collection of twill pants with an original retail price of
$100 was promoted for 25% off. There was a coupon in
the circular for an additional 20% off. What is the total
markdown if 200 pants were sold?
MARKDOWNS

Solution:
First Markdown on Group
Original retail price $100
– First percent off markdown (25%) – $25
New retail price = $75
– Second percent off markdown (20%) – $15
= New retail price = $60
Total markdown = $25 + $15 = $40 × 200 Units sold = $8,000.00
MARKDOWNS

Problem:
The sales in the men’s footwear department were planned
for $560,000, and the markdown percentage was planned
at 35%. Find the dollar amount of markdowns that would
be permitted.
Solution
Total planned markdown $ = $560,000 net sales x 35%
Planned markdown %
Total planned markdown $ = $196,000
GROSS MARGIN PERCENT

• Major indicator of company’s health = the profit remaining after

costs of goods sold are subtracted from sales
• Showing seasonal and yearly improvement is a critical success
factor for every buyer
• Gross margin % = Gross Margin Dollars/Net Sales X 100
For the first quarter, the junior sportswear department had the following gross margin
figures with a cumulative markup of 55.0%. Calculate the Gross Margin %.

Sales Gross Margin $

February $12,000 $6,000
March $10,000 $4,500
April $9,000 $4,000
WHAT IS THE DIFFERENCE BETWEEN GROSS
MARGIN AND GROSS PROFIT?
• Gross margin is the amount or percent before subtracting the selling, general and
administrative, and interest expenses.
• Profit margin is the amount or percent after the selling, general and administrative, and
interest expenses are subtracted. For example, a chain of grocery stores many have a
gross margin of 20%, but its profit margin may be 1% (of net sales).