Making Sense of MarkupsMaking Sense of Markups

Pricing ProductsPricing ProductsDoes a retailer make the products

it sells?◦Not Usually –buy from

wholesalers/producersDoes a Retailer buy a shirt for $15

and sell it to customers for $15?◦Why or Why not?

If a retailer does not sell its products for more than what it cost them, what would happen?

Rounding in MarketingRounding in MarketingRound money to the nearest

100th ◦$435.34555◦$435.35

Round Percentages to nearest tenth◦97.567%◦97.6%

Pricing ProductsPricing ProductsTo make a profit, what must a

business do with the products they buy to sell?◦Mark them up

What is Mark-upWhat is Mark-upCost: the initial price paid by

retailers/manufacturers for the products they sell◦ Includes shipping costs

Markup: adding a dollar amount (markup), as a percentage or a dollar amount, to the cost of the products purchased to sell to customers◦ Used by retailers and wholesalers primarily

Retail Price: The total price charged for a product sold to a customer, which includes the manufacturer's cost plus a retail markup.

Convert % to a DecimalConvert % to a Decimal

•Process: Drop the % symbol and move the decimal point 2 places to the left

Example: Convert 75% to a decimal:

Example: Convert 8.5% to decimalAnswer 8.5% = 0.085

Example: convert 180%Answer 180% = 1.80

How to MarkupHow to MarkupMost difficult thing to determine in

business is how to price your product

Should every product a business sells be “marked-up” the same percentage?”◦No, every item is different and is based

on: Customer Demand for a product What competitors are pricing their products

for

Calculating Markup Calculating Markup Amount Amount

Formula: Markup = Retail Price – Cost◦Difference between retail price and

cost◦The markup may also be called the gross profit or profit margin

ExampleExampleDiscount Electronics purchased

HDTVs for $489.56 each and sells them for $899.99

What is the markup amount on each TV?

Markup = Retail Price – CostMark up = 899.99 – 489.56 =

410.43

Calculate Retail Price Calculate Retail Price w/Markup Ratew/Markup Rate First calculate the markup

amount Then add the markup amount to

the cost to equal your Retail Price

Two Step Formula: Markup = Cost * Markup Rate Retail Price = Cost + Markup

ExampleExampleWholesale Jewelers, Inc. sells

digital watches to jewelry stores for $18.45 each. The suggested retail price is to add a mark-up rate of 160% of cost. What is the suggested retail price?

Markup = * = Retail Price = + =

Formula:Markup = Cost * Markup RateRetail Price = Cost + Markup

29.52

47.97

Let’s PracticeLet’s PracticeWhat is 170% of $125 cost

◦ Markup◦ Retail Price:

104% of $4329 cost is what?◦ Markup:◦ Retail Price:

Calculate Additional Calculate Additional QuantityQuantity

You want to purchase more product than last year.Formula:

◦ Additional Quantity = Original order * converted %◦ Total Order = Additional Quantity + Original order

Example:You bought 95 hats last year and want to increase your order by 50% more this year.

95 X .50 = 47.50 47.50 + 95 = 142.50 round up/down

◦ How many are you buying? 143 items

ExampleExampleIf our school store purchased 144

mittens last year, and this year we would like to purchase 30% more than last year. How many mittens do we need to order this year?

144 * .30 = 43.2144 + 43 = 187 mittens

Markup as a Rate Markup as a Rate (Percentage)(Percentage)The markup rate is the markup

expressed as a percentBusinesses usually express the

markup in one of two ways:◦As a percent of the Retail price◦As a percent of Cost

Markup as a Percent of Markup as a Percent of RetailRetail Price PriceBusinesses usually express the markup as

a percent of the retail price (selling price)Formula: Markup rate = Markup / Retail

PriceExample: Luggage costs $54 and you

want to sell it for $90, what is the markup rate based on retail price?◦ Markup Amount = Retail Price – Cost

$90-$54 = $36 markup◦ Markup rate = Markup / Retail Price

36/90 = .40 or 40% markup Rate

Markup as a Percent of Retail Markup as a Percent of Retail PricePriceA Florist buys roses for $10.99 a dozen

and sells them for $24.95 a dozen. What is the markup rate based on the retail or selling price?

Markup = Retail Price – CostMarkup Amount = 24.95-10.99

= 13.96

Markup rate = Markup / Retail PriceMarkup rate = 13.96/24.95

◦ Markup rate = .5596◦ Markup rate = 56%

Markup as a Percent of Retail Markup as a Percent of Retail PricePriceOur school store purchases a printed Under Armour hooded sweatshirt from Gear for Sports for $37.50. We sell the hooded sweatshirt for $60.00. What is the markup rate based on retail price?

Markup rate = Markup / Retail Price$60.00 – $37.50 = $22.50 markup

◦ $22.50 / $60.00 = .375 = 37.5%

Markup as a Percent of Markup as a Percent of CostCostMany businesses use the cost to

figure the markup rateFormula: Markup rate = Markup / Cost

Example: Rain suit cost $120 and you want to sell it for $162. What is the markup based on cost?◦First calculate markup: $162- $120 =

42◦Next calculate markup rate: 42/120 =

35%

PracticePracticeGear for Sports sells under armour

t-shirts to the school store for $13.50 each. They have a suggested retail price computed by marking up the cost by 60%. What is the suggested retail price?

Markup = Cost * Markup Rate◦13.50 * .60 = 8.10

Selling Price = Cost + Markup◦Selling Price = 13.50 + 8.10 = $21.60

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