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# 12.

## 4Markup and Markdown

GOALS
Calculate cost and selling price when
markup is based on selling price
Calculate the rate of markup based on
cost
Calculate markdown and selling price

Thomson/South-Western

Lesson 12.4

Slide 1

Selling Price
Businesses have to decide what price to
charge for an item.
The price must cover the cost of the item, all
a profit.

Thomson/South-Western

Lesson 12.

Slide

## Markup Based on Selling Price

One way businesses price items is to use
markup pricing.
With markup pricing, an amount is added to
the cost of the goods to cover all other
expenses plus a profit.
This is known as the markup or margin.
The selling price is the price at which the item
is actually sold.

Thomson/South-Western

Lesson 12.

Slide

Price Lines
Retailers often sell goods in price lines.
The different price lines are expected to
appeal to the different needs of buyers.
For example, an auto supply store may stock
three price lines of car batteries.
One price line sells for \$79.99; another line sells
for \$69.99; a third line sells for \$59.99.

## (continued on the next slide)

Thomson/South-Western

Lesson 12.

Slide

Price Lines

(continued)

## When batteries are bought by a retailer for a

price line, such as \$59.99, the selling price is
The problem is to find the highest price the
retailer can pay for the batteries and still get
the markup it wants.
If the cost of the batteries is too high, the
retailer will make too little profit in selling
them.

Thomson/South-Western

Lesson 12.

Slide

## Markup Based on Cost

While many businesses use the selling price
to figure markup, others use the cost.
When the cost price is used, you find the rate
of markup by dividing the markup by the cost.
Rate of Markup = Markup Cost

Thomson/South-Western

Lesson 12.

Slide

Markdown
In some cases, retailers reduce prices by
applying a markdown to their marked price, or
original selling price.
The marked price is the price that is marked on
the item.
The selling price is always the price the item
actually sold for.

Thomson/South-Western

Lesson 12.

Slide

## Rationale for Markdowns

A markdown may be taken on the marked
price at the end of a season or on items that
are not selling well.
Markdowns might also be done to attract
customers to the store for a sale or to be
more competitive.

Thomson/South-Western

Lesson 12.

Slide

Markdown Formulas
Markdown, which is also known as discount,
is stated as a percentage of a marked price.
Rate of Markdown Marked Price = Markdown
Marked Price Markdown = Selling Price

Thomson/South-Western

Lesson 12.

Slide

## 1. As the buyer for Rezden Electronics, you are

buying a travel alarm clock for a line that sells
at \$11.98. What is the most that you can pay for
the clock and maintain a markup of 45% of the
selling price?
0.45 \$11.98 = \$5.391, or \$5.39 markup
\$11.98 \$5.39 = \$6.59 cost

Thomson/South-Western

Lesson 12.

Slide

## 3. You must buy binoculars for a line that sells

for \$64.89. What is the most that you can pay for
the binoculars and make a markup of 34% on
the selling price?
0.34 \$64.89 = \$22.062, or \$22.06 markup
\$64.89 \$22.06 = \$42.83 cost

Thomson/South-Western

Lesson 12.

Slide

## 4. A retailer paid \$2.50 for a 25-foot measuring

tape. What is the selling price of the measuring
tape with a markup of 60% on selling price?
100% 60% = 40% cost as a percent of
selling price
\$2.50 40% = \$2.50 0.4 = \$6.25 selling price

Thomson/South-Western

Lesson 12.

Slide

## 5. The cost price of a bag of rice is \$1.10. What

is the selling price of the rice if a storeowner
wants a markup of 24% on selling price?
100% 24% = 76% cost as a percent
of selling price
\$1.10 76% = \$1.10
\$1.10 0.76 = \$1.447, or \$1.45 selling price
\$1.45 x .24 = .348 35 cents 1.45 - .35 = 1.10

Thomson/South-Western

Lesson 12.

Slide

faucets at \$80 each, less 20% and 10%. The
store sells them at \$90. a. How much does the
stores markup each? b. What percent is this of
the selling price?
a. 80% 90% = 0.8 0.9 = 0.72, or 72%
invoice price as percent of list price
0.72 \$80 = \$57.60 invoice price
\$90 \$57.60 = \$32.40 markup amount
b. \$32.40 \$90 = 0.36, or 36% markup percent

Thomson/South-Western

Lesson 12.

Slide

## 8. The cost of a remote-control racer is \$47.80. A

retailer wants to sell the racer for \$83.65. What
rate of markup based on cost will the retailer
use?
\$83.65 \$47.80 = \$35.85 markup
\$35.85 \$47.80 = 0.75, or 75% rate of markup

Thomson/South-Western

Lesson 12.

Slide

## 11. Early shoppers who come to a store before

8:00 a.m. get a 15% discount on all clothing. a.
For a jacket marked at \$59, what discount will
an early shopper get? b. What is the jackets
selling price after the discount is taken?
a. 0.15 \$59 = \$8.85 early shopper discount
b. \$59 \$8.85 = \$50.15 selling price

Thomson/South-Western

Lesson 12.

Slide

## 12. On a special shopping day, a stores charge

account customers get an extra 20% off on
purchases of household items. The price of
blankets with a marked price of \$35 will be
reduced by a 15% discount taken at the
register. a. What is the blankets reduced price,
after the markdown? a. What is the blankets
selling price to a charge account customer?
a. 0.15 \$35 = \$5.25 markdown
\$35 \$5.25 = \$29.75 price after markdown

Thomson/South-Western

Lesson 12.

Slide

## 12. On a special shopping day, a stores charge

account customers get an extra 20% off on
purchases of household items. The price of
blankets with a marked price of \$35 will be
reduced by a 15% discount taken at the
register. a. What is the blankets reduced price,
after the markdown? a. What is the blankets
selling price to a charge account customer?
b. 0.2 \$29.75 = \$5.95 discount for charge
account customers

Thomson/South-Western

Lesson 12.

Slide

## 12. On a special shopping day, a stores charge

account customers get an extra 20% off on
purchases of household items. The price of
blankets with a marked price of \$35 will be
reduced by a 15% discount taken at the
register. a. What is the blankets reduced price,
after the markdown? a. What is the blankets
selling price to a charge account customer?
\$29.75 \$5.95 = \$23.80 selling price to charge
customers

Thomson/South-Western

Lesson 12.

Slide

## 14. Cronin Auto Parts bought a mechanics tool set for

\$175 each, less 40%. Cronin marked the tool set to sell at
\$200. At a sale, the tool set was sold for 20% off the
marked price. a. What was the invoice price of the tool
set? b. What was the sale price? c. On each set sold at
the sale, what was the amount the store made as
markup? d. The markup was equal to what percent of
the selling price, rounded to the nearest percent?

## a. 0.4 \$175 = \$70 trade discount

\$175 \$70 = \$105 invoice price

Thomson/South-Western

Lesson 12.

Slide

## 14. Cronin Auto Parts bought a mechanics tool set for

\$175 each, less 40%. Cronin marked the tool set to sell at
\$200. At a sale, the tool set was sold for 20% off the
marked price. a. What was the invoice price of the tool
set? b. What was the sale price? c. On each set sold at
the sale, what was the amount the store made as
markup? d. The markup was equal to what percent of
the selling price, rounded to the nearest percent?

## b. \$200 0.2 = \$40 discount

\$200 \$40 = \$160 sale price

Thomson/South-Western

Lesson 12.

Slide

## 14. Cronin Auto Parts bought a mechanics tool set for

\$175 each, less 40%. Cronin marked the tool set to sell at
\$200. At a sale, the tool set was sold for 20% off the
marked price. a. What was the invoice price of the tool
set? b. What was the sale price? c. On each set sold at
the sale, what was the amount the store made as
markup? d. The markup was equal to what percent of
the selling price, rounded to the nearest percent?

## c. \$160 \$105 = \$55 markup

d. \$55 \$160 = 0.343, or 34% markup as a
percent