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    1.3buying and Selling

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    Aljun Aldava Bade
    This document discusses key concepts in retail business such as mark up, mark down, profit, and loss. It defines mark up as the difference between retail price and cost price used to cover business costs and generate a profit. Mark down is a decrease in selling price for reasons like competition or clearing outstock. Examples show calculations for mark up and mark down rates and values. The document also explains that the markup must exceed operating expenses for a business to earn a net profit, and if markup is lower, the business will incur a net loss.

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    1.3buying and Selling

    Uploaded by

    Aljun Aldava Bade
    3K views22 pages
    This document discusses key concepts in retail business such as mark up, mark down, profit, and loss. It defines mark up as the difference between retail price and cost price used to cover business costs and generate a profit. Mark down is a decrease in selling price for reasons like competition or clearing outstock. Examples show calculations for mark up and mark down rates and values. The document also explains that the markup must exceed operating expenses for a business to earn a net profit, and if markup is lower, the business will incur a net loss.

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    business math-buying and selling

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    1.3Buying and Selling

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    This document discusses key concepts in retail business such as mark up, mark down, profit, and loss. It defines mark up as the difference between retail price and cost price used to cover business costs and generate a profit. Mark down is a decrease in selling price for reasons like competition or clearing outstock. Examples show calculations for mark up and mark down rates and values. The document also explains that the markup must exceed operating expenses for a business to earn a net profit, and if markup is lower, the business will incur a net loss.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    3K views22 pages

    1.3buying and Selling

    Uploaded by

    Aljun Aldava Bade
    This document discusses key concepts in retail business such as mark up, mark down, profit, and loss. It defines mark up as the difference between retail price and cost price used to cover business costs and generate a profit. Mark down is a decrease in selling price for reasons like competition or clearing outstock. Examples show calculations for mark up and mark down rates and values. The document also explains that the markup must exceed operating expenses for a business to earn a net profit, and if markup is lower, the business will incur a net loss.

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    © All Rights Reserved
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    Download as ppt, pdf, or txt
    of 22

    CHAPTER 6 :

    MARK UP & MARK DOWN


    6.1 Mark Up
    6.2 Conversion of
    Mark Up Percent
    6.3 Mark Down
    6.4 Profit & Loss
    Objectives

    Analyze and solve


    problems on
    important factors in
    managing a
    business: buying
    products and selling
    products
    6.1 Mark Up
    Mark up – Introduction
    An important principle in retail business is the
    proper pricing of its merchandise.
    Wrong pricing may lead to small profit or heavy
    loss.
    The cost price is the original price of the
    merchandise paid by the retailer.
    The retailer must add an additional amount
    called the markup to its cost to cover its
    business and to provide a profit.
    6.1 Mark Up
    Mark up – Definition
    The sum of this cost and markup is the retail
    (or selling) price.
    In other words, markup (or gross profit or
    gross margin) is the difference in the retail price
    and cost price;
    R=C+M
    R = retail (selling) price
    C = cost price
    M = markup or gross profit
    EXAMPLE: Retail/Selling Price

    1. A math book cost the store manager P 161


    and he marked it up another P 89. What is the
    selling price of the book?

    Solution

    Given: C = P 161 M = 89

    R=C+M
    =P161 + 89
    = P 250
    EXAMPLE: Retail/Selling Price

    2. AUS Electronics pays P 37,200 for a digital


    camcorder. If the markup is 19% on the cost,
    find the retail price.
    Solution

    Given: C = P37,200 MRsp = 0.19

    R = C + (C x MRc)
    = 37,200 + (37,200 x 0.19)
    = 37,200 + 7,068
    = P44, 268
    EXAMPLE: Markup Value

    1. RFS Sports Inc. sells home-gymnasium


    package for P 175, 000 and maintains a
    markup of 37% on selling price. Find the
    markup value
    Solution

    Given: R = P 175,000 MRsp = 0.37

    Msp = MRsp x R
    = 0.37 x 175,000
    = 64,750
    EXAMPLE: Markup Value

    2. The grocer purchase a gallon of mineral


    water for P 49.50 and sells it for P 56.75. What
    is his gross profit (markup)?

    Solution

    Given: R = P 56.75 C = 49.50

    R=C+M
    M = SP – C
    56.75 – 49.50
    7.25
    EXAMPLE: Cost

    1. The washing machine has a selling price of


    P 4,792. It had been marked up P 1,248. What
    was its cost?

    Solution

    Given: SP = P4,792 M = P1,248


    SP = C + M
    C = SP – M
    = P4,792 - P1,248
    = 3,544
    EXAMPLE: Cost

    2. A hot-and-cold water dispenser sells for P


    8,021.50. The markup on it is 31.5% of the
    cost. Find the cost.

    Solution

    Given: SP = P 8,021.50 MR = 0.315


    C = SP/ (1 + MR)
    = 8,021.50/ (1+0.315)
    = 8,021.50/ 1.315
    =6,100
    EXAMPLE: Markup Rate
    1. A laser printer costing P 8,750 is sold for P
    12,250. Find the markup rate based on cost.

    Solution
    Given: C = 8,750

    MRc = Mc/C
    (SP – C) / C
    = (12,250 – 8,750) / 8,750
    = .40 or 40%
    EXAMPLE: Markup Rate
    2. A wall clock cost P 608.40 and sell for
    P780. What is the percentage of markup
    based on selling price?

    Solution
    Given: C = P608.40 SP = P789

    MRsp = Msp / SP
    (SP – C) / SP
    = (780 – 608.40) / 780
    = .22 or 22%
    Exercises
    If an item cost P 67.50 and is marked up
    another P12.50, what would be the
    selling price?
    Solution P 80
    A pair of rubber shoes costing P 3,490
    has a markup rate of 62%. Find the retail
    price.
    Solution P 5,653.8
    Exercises
    If a merchandise costing P 4,290 is sold
    for P 6,140, what is the markup rate?

    Solution 43.12%
    Find the markup on air-soft guns made
    in Taiwan if the cost is P 5,700 and the
    markup is 29% of selling price.
    Solution
    P 1,653
    Exercises
    If an electric flat iron was sells for P
    944.64 and is marked up with 15.2% on
    the cost. What is the cost?
    Solution P 1,088.23
    A wrist watch cost P 1, 476 is being sold
    for P 3,600. Find the markup rate based
    in cost
    Solution
    143.90%
    6.3 Mark Down
    Mark down – Definition
    Markdown is a decrease in the selling
    price.
    It is the difference in the old retail price
    and the new retail price; that is
    MD = OP – NP
    MD = mark down
    OP = old retail price
    NP = new retail price
    6.3 Mark Down
    Mark down – Percent
    Prices sometimes are markdown due to
    many reasons:
    to face stiff competition
    to encourage purchases in bulk
    to dispose off old, damaged or obsolete
    stocks
    to close a line of merchandise.
    EXAMPLE
    1. What is the markdown and the sale price on
    an antique jar that has a regular price of P
    35,800 and is on sale for 26% off the
    regular price
    Solution

    Given: Regular Price = P 35,800 Markdown Rate = 0.26

    MD = RP X MDr SP = RP - MD
    = P 35,800 x 0.26 = P 35,800 - P 9,308
    = P 9,308 = P 26,492
    EXAMPLE
    3. If all the merchandise, with a selling price
    of P7,800 is to be sold for P 6,474. Find the
    markdown.

    Solution

    Given: Regular Price = P7,800 Sale Price = P6,474

    SP = RP - MD
    MD = RP – SP
    = P 7,800 - P6,474
    = 1,326
    EXAMPLE
    4. Sofia has some shirt in her boutique that
    have not been sold. She decided to mak
    them down from P 850 to P 552.5, what
    percentage did she mark them down?
    Solution

    Given: Regular Price = P850 Sale Price =P 552.50


    MDr = MD/RP
    (RP - SP) /RP
    = (850 – 552.50)/850
    =297.5/850
    =0.35 or 35%
    6.4 PROFIT & LOSS
    Not all businesses make money.
    A business incurs operating expenses, OE
    such as: rents, lighting, wages,
    commissions, bonus and other operating
    expenses.
    The markup must be able to cover the
    operating expenses.
    If markup is greater than operating
    expenses, net profit is achieved.
    However if markup is less than operating
    expenses, loss is incurred.
    6.4 PROFIT & LOSS

    If the retail price just covers the cost price


    and the operating expenses, then it does
    not make any profit nor incur any loss.
    This price is called the breakeven price,
    that is;
    Breakeven price = cost price +
    operating expenses
    The earlier markup equation, now can be
    expressed as follows;
    Retail price = Cost + Net profit + Operating
    expenses
    OR R  C  NP  OE

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