MARKUP

The amount added to the cost of an item to cover the operating expenses and profit is known as the markup, mark-on, or margin. It is the difference between the cost and the selling price of an item.

Selling Price - the equation states that the selling price of an item is equal to the cost plus markup.

Selling Price = Cost + Markup

S = C + M

Illustration:

If a camera costs a retailer Php3 071 and and a Php2 259 markup is added to cover operating expenses ad profit, the selling price of the camera would be Php5 330.

Php3 071 (Cost) + Php2 259 (Markup) = Php5 330 (Selling Price)

Equations are solved by isolating the unknowns. So, when the amount of markup is the unknown, the equation can be written as

Markup = Selling Price - Cost

M = S - C

When the cost is unknown, the equation becomes

Cost = Selling Price - Markup

C = S - M

Examples:

1. Mementos Gift Shop pays Php205 for a picture frame. If a markup of Php115 is added, what is the selling price of the frame?

Step 1: Because the selling price is the unknown variable, we use the formula 

S = C + M

S = Php205 + Php115 = Php320

2. Reliable Office Supply buys printing calculators from Taiwan for Php11 075 each. If they are sold for Php13 500, what is the amount of the markup?

Step 1: Because the markup is the unknown variable, we use the formula 

M = S - C

M = Php13 500 - Php11 075 = Php2 425

3. Safeway Supermarkets sell Corn Cereal for Php179 per box. If the markup on this item is Php25, how much did the store pay for the cereal?

Step 1: Because the cost is the unknown variable, we use the formula 

C = S - M

C = Php179 - Php25 = Php154

There are two ways to represent markup as a percent: based on cost and based on selling price.

The answer describes what percent the markup is of the cost; therefore, it is called percent markup based on cost. We use the formula: 

The calculation of percent markup based on selling price is the same as that for the percent markup based on cost except that the base (the denominator) changes from cost to selling price. We use the formula:

MARKDOWN

A price reduction from the original selling price of merchandise is known as a markdown. Most markdowns should not be regarded as losses but as sales promotion opportunities used to increase sales and profits.

A markdown is a reduction from the original selling price of an item to a new sale price.

To determine the amount of a markdown, we use the following formula:

Markdown = Original selling price - New selling price

Illustration:

If a sweater was originally marked at Php550 and then was sale-priced at Php400, the amount of markdown would be Php150.

Php550 (Original selling price) + Php400 (New selling price) = Php150 (Markdown)

To find the markdown percent, we use the percentage formula, where the markdown percent is the rate, the amount of the markdown is the percentage, and the original selling price is the base:

To find the new selling price after a markdown, we use the percentage formula, where the sale price is the percentage, the original price is the base, and (1 - Markdown rate/percent) is the rate.

Complete the following table. Show your computation on a separate sheet. Submission is on Google Classroom.