At the end of the lesson the students should be able to:

1. Identify the cost of production according to standard procedure .

2. Compute the total cost of production.

3. Display patience in calculating the cost of production.

KEEP IN MIND

How to Calculate Mark-up Percentage

Mark-up is the difference between how much an item costs you, and how much you sell that item for it's your profit per item. Any person working in business or retail will find the skill of being able to calculate mark-up percentage very valuable.

Instructions:

1. Calculate your peso mark-up. This is done by subtracting your buying price from your selling price.

Example:

Selling Price = 15.00

Purchase Cost/Buying Price/Original Price = - 10.00

Peso Mark-up/Mark-up Price = 5.00

2. Decide whether you want to calculate your percentage mark-up based on cost or selling price. Once you choose which you will be using to calculate, it is important you stick to the method you choose throughout all your calculations, or you will end up with faulty data. If you decide to calculate your percent mark-up based on cost, go on to Step 3. If you decide to calculate your percent mark-up based on selling price, go on to Step 4.

3. Calculate percent mark-up based on cost. This is done by dividing the peso mark-up by the cost.

Example:

Peso Mark-up = 5.00

Purchase Cost/Buying Price/Original Price = ÷10.00

Percent Mark-up/Mark-up Rate = 0.5%

4. Calculate your percent mark-up based on selling price. This is done by dividing the peso mark-up by the selling price.

Peso Mark-up/Mark-up Price = 5.00

Selling Price = ÷15.00

Percent Mark-up/Mark-up Rate = 0.33 %

5. Make sure you consistently use either cost of the product or selling price to find the percent mark-up on an item. Even though the cost, selling price, and peso mark-up will always be the same, the percentage mark-up will be drastically different depending on if you calculate it using selling price or cost. Using selling price will give you a lower percentage mark-up (assuming you are making a profit), while using cost will give you a higher percentage mark-up.

Cost of production refers to the total cost incurred by a business to produce a specific quantity of a product or offer a service. Production costs may include things such as labor, raw materials, or consumable supplies. In economics, the cost of production is defined as the expenditures incurred to obtain the factors of production such as labor, land, and capital that are needed in the production process of a product.

Mark-up is the difference between how much an item costs you, and how much you sell that item for it's your profit per item. Any person working in business or retail will find the skill of being able to calculate mark-up percentage very valuable.

One of the greatest weapons against profit loss is to know your food costs. Food cost determines a restaurant's profitability. Production cost is important to the supply side of the market. Sellers base supply decisions on the cost of production. In that production cost generally increases as more of a good is production, the supply price also tends to rise with the quantity supplied.