Markup16-1SECTION

Section ObjectiveCompute:

markup in dollars

Key Words to Know

cost

The actual amount paid for a product, as opposed to its selling price, and which can include expenses such as freight charges and taxes.

Key Words to Know

selling price

What a product actually sells for in the store, also called retail price.

markup

The difference between the cost of a product and the selling price when the selling price is higher.

Key Words to Know

gross profit

The amount of money a supplier makes on a product when it sells it for more than cost.

net profit

Any money left after expenses have been deducted from gross profits, also called net income.

Markup = Selling Price – Cost

Formula

Discount Electronics purchased TV/DVD sets for $187.83 each.

Discount Electronics sells the TV/DVD sets for $299.99 each.

What is the markup on each TV/DVD?

Do Now

Step: Find the markup.

Selling Price – Cost

$299.99 – $187.83 = $112.16

Do Now- Answer

ASSIGNMENT

Workbook p.113

Markup Rate16-2SECTION

Section ObjectiveCalculate:

markup as a percent of the selling price

Key Words to Know

markup rate

The markup on an item expressed as a percent of its selling price.

Markup Rate = Markup ÷ Selling Price

Formula

Roy’s Florist buys roses for $10.99 a dozen.

It sells them for $18.95 a dozen.

What is the markup based on the selling price?

Do Now

Find the markup.

Selling Price – Cost

$18.95 – $10.99 = $7.96

Do Now Answer: Step 1

Find the markup rate based on the selling price.

Markup ÷ Selling Price

$7.96 ÷ $18.95 = 0.420 or 42%

Do Now Answer: Step 2

A ⅜-inch drill kit sells for $59.99.

The cost of the drill kit to the store is $29.00.

Find the markup as a percent of the selling price.

Do Now 2

Find the markup.

Selling Price – Cost

$59.99 – $29.00 = $30.99

Do Now 2 Answer: Step 1

Find the markup as a percent of the selling price.

Markup ÷ Selling Price

$30.99 ÷ $59.99 = 0.5165 or 51.2%

Example 2 Answer: Step 2

ASSIGNMENT

Workbook p.114

Net Profit16-3SECTION

Section ObjectiveFigure out:

net profit in dollars

Key Words to Know

operating expenses

The costs of running a business, such as salaries, rent, utilities, and taxes, also called overhead.

How do I calculate overhead expenses?

Overhead = Selling Price × Overhead Percent

How do I calculate the net profit?

Net Profit = Markup – Overhead

Formulas

Sport Shop purchases water tubes for $44.98 each.

It sells the tubes for $89.99 each.

The owner estimates the overhead expenses to be 40 percent of the selling price of the merchandise.

What is the net profit on each tube?

Do Now

Find the markup.

Selling Price – Cost

$89.99 – $44.98 = $45.01

Do Now Answer: Step 1

Find the overhead.

Selling Price × Overhead Percent

$89.99 × 40% = $35.996 or $36.00

Do Now Answer: Step 2

Find the net profit.

Markup – Overhead

$45.01 – $36.00 = $9.01

Do Now Answer: Step 3

Anamarie’s Shoppe buys shirts at a cost of $12.78. Anamarie’s sell the chemises at a selling price of $24.49. Its management estimates the overhead expenses to be 34 percent of the selling price of the merchandise.

What is the net profit on each shirt sold?

Do Now 2

Find the markup.

Selling Price – Cost

$24.49 – $12.78 = $11.71

Example 2 Answer: Step 1

Find the overhead.

Selling Price × Overhead Percent

$24.49 × 34% = $8.3266 or $8.33

Example 2 Answer: Step 2

Find the net profit.

Markup – Overhead

$11.71 – $8.33 = $3.38

Do Now 2 Answer: Step 2

Net-Profit Rate16-4SECTION

Section ObjectiveFind out:

net profit as a percent of the selling price

Key Words to Know

net-profit rate

The net profit on an item expressed as a percent of the selling price.

Net-Profit Rate = Net Profit ÷ Selling Price

Formula

Giant Discounts sells a vacuum cleaner for $49.99. The cost of the vacuum cleaner to Giant Discounts is $23.74. Giant estimates the overhead expenses on the vacuum to be 30 percent of the selling price.

What is the net-profit rate based on the selling price of the vacuum cleaner?

Do Now

Find the net profit.

Markup – Overhead

($49.99 – $23.74) – ($49.99 × 30%)

$26.25 – $15.00 = $11.25

Do Now Answer: Step 1

Find the net-profit rate.

Net Profit ÷ Selling Price

$11.25 ÷ $49.99 = 0.2250 or 22.5%

Do Now Answer: Step 2

A robot transformer costs the Toy Store $7.85.

It has a selling price of $16.96.

The store estimates overhead at 28 percent of the selling price.

Find the net-profit rate based on the selling price.

Do Now 2

Find the net profit.

Markup – Overhead

($16.96 – $7.85) – ($16.96 × 28%)

$9.11 – $4.75 = $4.36

Do Now 2 Answer: Step 1

Find the net-profit rate.

Net Profit ÷ Selling Price

$4.36 ÷ $16.96 = 0.2570 or 25.7%

Do Now 2 Answer: Step 2

Determining Selling Price—Markup Based on Selling Price

16-5SECTION

Section ObjectiveCalculate:

selling price of an item based on the cost and markup rate

Selling Price = Cost ÷ Complement of Markup Rate

Formula

VJ’s Sporting Goods Store aims for a markup that is 40 percent of the selling price of its merchandise.

The store received a shipment of running shoes at a cost of $38.99 per pair.

What is the minimum selling price the store should charge?

Do Now

Sales for Month: $42,000 Percent of Total Sales

Cost of goods sold 25,200 60%

Overhead expenses 8,40020%

Profit 8,400 20%

TOTAL $42,000 100%

(Note: Markup plus cost equals selling price. If the markup is 40 percent of the selling price, then the cost must be 60 percent of the selling price. Sixty percent is the complement of 40 percent.)

Do Now (cont.)

Find the complement of the markup rate.

100% – 40% = 60%

Do Now Answer: Step 1

Find the selling price.

Cost ÷ Complement of Markup Rate

$38.99 ÷ 60% = $64.98

Do Now Answer: Step 2

Circuit Town purchased some digital cordless phones for $31.99.

Its markup policy is 20 percent based on the selling price.

What is the selling price of the phones?

Do Now 2

Find the complement of the markup rate.

100% – 20% = 80%

Example 2 Answer: Step 1

Find the selling price.

Cost ÷ Complement of the Markup Rate

$31.99 ÷ 80% = $39.99

Do Now 2 Answer: Step 2

ASSIGNMENT

Workbook p.115

Markup Rate Based on Cost16-6SECTION

Section ObjectiveSolve for:

markup rate based on cost

Markup Rate = Markup ÷ Cost

Formula

The Table Co. purchases a dinette set for $180 from the manufacturer.

It sells the set for $288.

What is the markup rate based on cost?

Do Now

Find the markup.

Selling Price – Cost

$288.00 – $180.00 = $108.00

Do Now Answer: Step 1

Find the markup rate based on cost.

Markup ÷ Cost

$108.00 ÷ $180.00 = 0.6 or 60%

Do Now Answer: Step 2

Corner Drugs buys 16-oz tea for $0.70 and sells it on sale for $0.77.

Find the markup rate based on cost.

Do Now 2

Find the markup.

Selling Price – Cost

$0.77 – $0.70 = $0.07

Do Now 2 Answer: Step 1

Find the markup rate based on cost.

Markup ÷ Cost

$0.07 ÷ $0.70 = 0.1 or 10%

Do Now 2 Answer: Step 2

ASSIGNMENT

Workbook p.116

Determining Selling Price—Markup Based on Cost

16-7SECTION

Section ObjectiveCompute:

selling price based on cost

markup rate

How do I calculate the markup?

Markup = Cost × Markup Rate

How do I calculate the selling price?

Selling Price = Cost + Markup

Formulas

Wholesale Jewelers sells watches to jewelry stores for $18.45 each. Wholesale Jewelers calculates the suggested retail price and attaches it to each watch. The retail price is computed by marking up the cost to the jewelry store by 160 percent of the cost.

What is the suggested retail selling price?

Do Now 1

Find the markup.

Cost × Markup Rate

$18.45 × 160% = $29.52

Do Now 1 Answer: Step 1

Find the selling price.

Cost + Markup

$18.45 + $29.52 = $47.97

Do Now 1 Answer: Step 2

Florida Nursery Stock sells hanging baskets to retail outlets at a cost of $2.58.

Most of the outlets mark up hanging baskets at 150 percent of cost.

What selling price do most outlets put on the hanging baskets?

Do Now 2

Find the markup.

Cost × Markup Rate

$2.58 × 150% = $3.87

Do Now 2 Answer: Step 1

Find the selling price.

Cost + Markup

$2.58 + $3.87 = $6.45

Do Now 2 Answer: Step 2

Markdown16-8SECTION

Section ObjectiveCalculate:

markdown in dollars

markdown as a percent of the regular selling price

Key Words to Know markdown

The difference between the regular selling price of an item and its sale price, or the amount of the discount.

markdown rate

The discount on an item expressed as a percent of its regular selling price, such as 20 percent.

How do I calculate the markdown?

Markdown = Regular Selling Price – Sale Price

How do I calculate the markdown rate?

Markdown Rate = Markdown ÷ Regular Selling Price

Formulas

Ski’s Sport Shop sells cross-country skis at a regular selling price of $98.49.

For one week only, Ski’s has marked down the price to $68.94.

What is the markdown rate?

Do Now 1

Find the markdown rate.

Markdown ÷ Regular Selling Price

$29.55 ÷ $98.49 = 0.3000 or 30%

Do Now 1 Answer: Step 2

Find the markdown.

Regular Selling Price – Sale Price

$98.49 – $68.94 = $29.55

Do Now 1 Answer: Step 1

Diamond Connection has marked down diamond heart necklaces from $49.99 to $39.99.

What is the markdown and the markdown rate?

Do Now 2

Find the markdown.

Regular Selling Price – Sale Price

$49.99 – $39.99 = $10.00

Do Now 2 Answer: Step 1

Find the markdown rate.

Markdown ÷ Regular Selling Price

$10.00 ÷ $49.99 = $0.2000 or 20.0%

Do Now 2 Answer: Step 2

ASSIGNMENT

Workbook p.117