MARK-ON, MARKUP, and MARKDOWN

According to Google
mark-on is the difference between the cost of good and its selling price. Mark-on
price is the price at which the company achieves profit, after all its production costs
have been incurred.
•Markup is the amount of money above their cost of a product or
service that a business will charge for that product or service.
•The Price of a product or service is what a business is charging after
it applies a markup.
•Markdown is the reduction in price of a product or service based on
a percentage of the original price.
•The Original Price of a product or service is what a business was
charging before it decided to apply a markdown.
•The Sale Price of a product or service is what a business is charging
after it applies a markdown.
• Markdowns
• Businesses generally use markdowns to generate sales and/or clear
inventory
• The Markdown Rate is expressed as a percentage
• Given two of SalePrice, OriginalPrice, and MarkdownRate:
To cover the expenses or overhead of running the business, a Markup (M) is Put
on products. The sum of the cost © and markup determines the selling price (S).
Formula:
S= C + M
Markup can also be defined as the sum of the expenses (E) and profits (P).
Formula;
S=C + E + P
The Formula for the rate if Markup is based on cost doneted by Mc is given by ;
Mc(%) = Markup (100)
. Cost
And the formula for the rate of Markup based on selling price debited Ma is given
by;
Ms(%)= __Markup__ (100)
selling price
• CONCEPT

RATE; is the amount of a charge with reference to some basic amount. It is

usually expressed in percent.

BASE; is the basic amount on which the rate operate.

PERCENTAGE; is the part of the base determined by the rate.

Exercises:
Determine the RATE, BASE, and PERCENTAGE in the following situation

1. Don borrows P20,000 for 2 years. The interest paid after a year is 1,000
at 5% annual interest.
2. In a shipment of 250 parts, 50 of the parts were defective which is 20%
of the entire shipment.
3. John earned P500 interest from savings account paying 2% interes. He
palced P25,000 in the account.
4. In a department store, Kim bought a pair of shoes at P1,800. He saw
that The original price was P2,000 with a 10% discount.
5. Last week, the price of a jersey was P500. But after a week the price
increased by 10% with additional P50 to the original price.
Example 31.1
The cost of a new pair of sunglasses is P4,500. The selling price is P8,000. What is
the rate of Markup based on cost?
Solution
Since S= C + M
.
M= S- C
= 8,000-4,500
= P3,500

Computing for the rate of mark up based on cost, we get

. Mc= _M_ (100)=0.7778(100)=77.78%
. C
Samples 31.2
The new pair of shoes costs P5,500. The rate of Markup based
on the selling price is 15%. What are the selling price and the
markup?
Solution
S=C+ M
M= 0.15S
S= 5,500+0.15S
0.85S=5,500
S=P6,470.59
to compute the markup, we have
. M=0.15S=(0.15)(6,470.59)=P970.59
markup can also be computed by
• markup can also be computed by
. M=S – C = 6,470,59 - 5,500 = P970.59

. Business owners reduce the price of their products to much

competitor’s price adjustment. However, imposing a markdown may result to zero
profit. To compute for the highest rate of markdown, we solve for the following
elements first; the cost of one unit of commodity and the price that will cover all
the cost and expenses.
MARKDOWN
- may be done temporarily or permanently. A Temporary markdown is a
reduction in the selling price of an item to encourage consumers to increase their
demand on a particular product. On the other hand, permanent markdown is
implemented by companies to remove a “poor-sales” product from their inventory.
In general, the purpose of markdown is their to generate sales or to clear
inventory. The following formulas relate the selling price (S), original price (Po), and
markdown rate(Md).

S= Po (1-Md)
Po = S ______
1-Md
. Md=1- _S_
Po
Examples 31.3
After Christmas season, Sharon is considering to reduce the price of a gift wrapper.
Her original price is P30.

a. If she wants to decrease it’s price to P21, what is the markdown rate?
b. Suppose Sharon wishes to calculate the wrapper price based on the markdown
rate of just 20%, how much would her gift wrapper cost?

Solution

c. Md = 1- S__ = 0.3 = 30%

. Po
b. S=Po (1-Md) =30(1-0.2)=P24
Examples 31.4
find the markdown rate if the DVD was originally priced at P290.00 and was sold at P240.00
. Solution

Markdown= Original Price- selling price

=290-240
=250

Markdown rate = __Markdown. = __50__ = 21%

Selling price 240

Sometimes, especially during holidays (e.g. Christmas, Valentine’s Day, Mother’s Day, etc.) the price of
some goods like flowers, chocolates, and cakes increase fairly weeks prior to the said holiday.
MARK-ON
- when the price of a retail product increase fairly soon after another increase.
Some concept to consider:
1. A reduction in the regular selling price of a particular product occurs in response to
market conditions. It is called Markdown
2. The formula of the total cost is given by TC = C+ E where T. Is the Total cost, C is the
cost and E is the expense.
3. A break-even happens when a business has zero profit for a particular product at
break-even the products total cost is equal to it’s price. It means that the business
dies not make any profit or suffer from any loss.
4. Since S =C + E + P and TC = C + E then the selling price S become S = TC + P
5. The profit or loss can be obtained by getting the difference between the selling price
and total cost
. P = S – TC
Note that, when the value of P is negative, the selling price failed to cover the cost of
buying the product, thus, the business suffers from loss.
Examples 31.5
I. Sari-sari store sells a case of sotf drink at P360. The store’s overhead expenses are 40% of cost and the owner wants a
profit that is 25% of the cost.
A. How much is the cost of one case of soft drinks?

B. At what price must be store sell the case to cover all costs and expenses?

C. What is the highest rate of markdown so that the store will break-even?

D. Find the rate of discount that can be offered without acquiring an absolute loss

. (That is, failure to get back the cost of the commodity)

Solution

. A. Cost of one case of soft drinks

S =C+ E + P

. = C + 0.4C + 0.25C

S= 1.65C

360=1.65C

C = ___360_. =P218.18

1.65

. B. Price that will cover all the costs and expenses

otall cost TC = C + E

. =C + 0.4C

. =1.4C = 1.4 (218.18) = P305.46

. C. Maximum markdown to break-even: 360 - 305.46 =P54.54

. Rate of markdown = __markdown__ = __54.54__. = 0.1515 = 15.15%

. Selling price. 360

. D. Highest rate of discount

. Maximum amount of discount: 360 – 218.18 = P141.82
rate of discount = __Maximum discount__ = __141.82__ = 0.3939 = 39.39%
selling price. 360
 Activity

cost Selling Markup/ Rate based

in cost
Rate based on
selling price
Price markdown
25 30

48 52

350 500

280 220

390 375

450 250

23000 2800