2. Markups and Markdowns; Insight into Perishables
Chapter 8
Markups and Markdowns; Insight into Perishables
McGraw-Hill/Irwin
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

3. Markups and Markdowns; Insight into Perishables#8
Markups and Markdowns; Insight into Perishables
Learning Unit Objectives
Markup Based on Cost (100%)
LU8.1
Calculate dollar markup and percent markup on cost
Calculate selling price when you know cost and percent markup on cost
Calculate cost when dollar markup at percent markup on cost are known
Calculate cost when you know the selling price and percent markup on cost

4. Markups and Markdowns; Insight into Perishables#8
Markups and Markdowns; Insight into Perishables
Learning Unit Objectives
Markup Based on Selling Price (100%)
LU8.2
Calculate dollar markup and percent markup on selling price
Calculate selling price when dollar markup and percent markup on selling price are known
Calculate selling price when cost and percent markup on selling price are known
Calculate cost when selling price and percent markup on selling price are known
Convert from percent markup on selling price to percent markup on cost and vice versa

5. Markups and Markdowns; Insight into Perishables#8
Markups and Markdowns; Insight into Perishables
Learning Unit Objectives
Markdowns and Perishables
LU8.3
Calculate markdowns; compare markdowns and markups
Price perishable items to cover spoilage loss

6. Terminology Cost - The price retailers pay to a manufacturer
Selling Price - The price retailers charge customers
Markup, margin, or gross profit - The difference between the cost of bringing the goods into the store and the selling price
Operating expenses or overhead - The regular expenses of doing business such as rent, wages, utilities, etc.
Net profit or net income - The profit remaining after subtracting the cost of bringing the goods into the store and the operating expenses

7. Basic Selling Price Formula
Selling price (S) = Cost (C) + Markup (M)
$1,200
Computer
$900 - Price
paid to bring
computer
into store
$300 - Dollars to
cover expenses and profit

8. Markups Based on Cost (100%)
Dollar markup is the portion
Cost Markup = Selling Price
100% % %
Cost is 100% - the Base
Percent markup on cost is the rate

9. Calculating Dollar Markup and Percent Markup on Cost
Johnny buys Sunday’s newspaper for $ He plans to sell them for $ What is Johnny’s markup? What is his percent markup on cost?
Dollar Markup = Selling Price - Cost
$ = $ $1.00
Percent Markup on Cost = Dollar Markup
Cost
$ = 50%
$1.00

10. Calculating Selling Price When You Know Cost and Percent Markup on Cost
Ray’s Appliances bought a refrigerator for $150. To make desired profit, he needs a 60% markup on cost. What is Ray’s dollar markup? What is his selling price?
S = C M
S = $ ($150)
S = $ $90
S = $240
Dollar Markup

11. Calculating Cost When You Know Selling Price and Percent Markup on Cost
Jane’s imported flower business sells floral arrangements for $35. To make her desired profit, Jane needs a 40% markup on cost. What do the flower arrangements cost Jane? What is the dollar markup?
S = C M
$35 = C + .40(C)
$35 = 1.40C
$25 = C
M = S C
M = $35 - $25
M = $10

12. Markups Based on Selling Price (100%)
Dollar ($) markup is the portion (P)
Cost Markup = Selling Price
75% % %
Selling Price is 100% - the Base (B)
Percent (%) markup on selling price is the rate (R)

13. Calculating Dollar Markup and Percent on Selling Price
Johnny buys Sunday’s newspaper for $ He plans to sell them for $ What is Johnny’s markup? What is his percent markup on selling price?
Dollar Markup = Selling Price - Cost
$ = $ $1.00
Percent Markup on Selling Price = Dollar Markup
Selling Price
$ = 33%
$1.50

14. Calculating Selling Price When You Know Cost and Percent Markup on Selling Price
Ray’s Appliances bought a refrigerator for $150. To make desired profit, he needs a 60% markup on selling price. What is Ray’s selling price and dollar markup?
S = C M
S = $ (S)
-.60s S
.40S = $150
S = $375
M = S C
M = $375 - $150
M = $225

15. Calculating Cost When You Know Selling Price and and Percent Markup on Selling Price
Jane’s imported flower business sells floral arrangements for $35. To make her desired profit, Jane needs a 40% markup on selling price. What is the dollar markup? What do the flower arrangements cost Jane?
S = C M
$35 = C + .40($35)
$35 = C + $14
$14
$21 = C
Dollar Markup

16. Conversion
Formula for Converting Percent Markup on Cost to Percent Markup on Selling Price
Percent markup on cost
1+ Percent markup on cost
= = .33
Formula for Converting Percent Markup on Selling Price to Percent Markup on Cost
Percent markup on selling price
1- Percent markup on selling price
= = .50

17. Equivalent Markup Percent markup on Percent markup on cost
Selling Price (round to nearest tenth percent)

18. Selling price (original)
Markdowns
Markdown percent = Dollar markdown
Selling price (original)
Sears marked down a $50 tool set to $36. What are the dollar markdown and the markdown percent?
$36
$50-$36
Markdown
$14
$50
28%

19. Pricing Perishable Items
S = C M
TS = TC TM
TS = $ ($10)
TS = $17.50
Sue’s vegetable stand grew 20 pounds of tomatoes. Sue expects 15% of the tomatoes to become spoiled and not salable. The tomatoes cost Sue $.50 per pound. Sue wants a 75% markup on cost. What should Sue charge for each pound of tomatoes so she will make her profit?
TC = 20lbs. x $.50 = $10
20 lbs. X .15 = 3lbs
$ = $1.03
17lbs.
20lbs. - 3lbs