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## #8

### Markup Based on Cost (100%)

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1. Calculate dollar markup and percent markup on selling

price

2. Calculate selling price when dollar markup and percent

markup on selling price are known

3. Calculate selling price when cost and percent markup

on selling price are known

4. Calculate cost when selling price and percent markup

on selling price are known

5. Convert from percent markup on cost to percent markup on

selling price and vice versa

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## #8

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### Terminology

Selling Price - The price retailers charge customers Cost - The price retailers

pay to a manufacturer or supplier

Markup, margin, or gross profit - The difference between

the cost of bringing the goods into the store and the selling

price

such as rent, wages, utilities, etc.

Net profit or net income - The profit remaining after subtracting the cost of bringing the goods into the

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### Basic Selling Price Formula

Selling price (S) = Cost (C) + Markup (M)

\$23 Jean \$18 - Price paid to bring Jeans into store \$5 - Dollars to cover operating expenses and make a profit

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### Markups Based on Cost (100%)

Cost + Markup = Selling Price 100% 27.78% 127.78% Cost is 100% - the Base Dollar markup is the portion Percent markup on cost is the rate

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### Percent Markup on Cost

Gap buys fleece jackets for \$18. They plans to sell them for \$23. What is Gap’s markup? What is the

percent markup on cost?

Dollar Markup = Selling Price - Cost \$ 5 = \$23 - \$18

Percent Markup on Cost = Dollar Markup Cost \$5 = 27.78%

\$18

Check: Selling Price = Cost + Markup 23 = 18 + .2778(18)

\$23 = \$18 + \$5

Cost (B) = Dollar Markup

Percent markup on cost \$5 = \$18

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### Cost and Percent Markup on Cost

Mel’s Furniture bought

a lamp for \$100.

To make Mel’s desired profit, he needs a 65% markup on cost. What is Mel’s dollar markup? What is his selling price?

S = C + M

S = \$100 + .65(\$100) S = \$100 + \$65

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### Price and Percent Markup on Cost

Jill Sport, owner of Sports, Inc., sells tennis rackets for \$50. To make her desired profit, Jill needs a 40% markup on cost. What do the tennis rackets cost Jill? What is the dollar markup?

S = C + M \$50 = C + .40(C) \$50 = 1.40C 1.40 1.40 \$35.71 = C M = S - C M = \$50 - \$35.71 M = \$14.29

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### Markups Based on Selling Price (100%)

Cost + Markup = Selling Price 78.26% + 21.74% = 100% Selling Price is 100% - the Base (B) Dollar (\$) markup is the portion (P) Percent (%) markup on

selling price is the rate (R)

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### on Selling Price

The cost to Gap for a hooded fleece jacket is for \$18; the store then plans to sell them for \$23. What is Gap’s dollar markup? What is its percent markup on selling price?

Dollar Markup = Selling Price - Cost \$ 5 = \$23 - \$18

Percent Markup on Selling Price = Dollar Markup Selling Price \$5 = 21.74%

\$23

Check: Selling Price = Cost + Markup 23 = 18 + .2174(\$23)

\$23 = \$18 + \$5

\$5 = \$23 .2174

Selling Price = Dollar Markup Percent markup on SP

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### Cost and Percent Markup on Selling Price

Mel’s Furniture bought a lamp

for \$100. To make desired profit, he needs a 65% markup on selling price. What are Mel’s selling

price and dollar markup?

M = S - C M = \$285.71 - \$100 S = C + M S = \$100 + .65(S) -.65s - .65S .35s = \$100 .35 .35

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### and Percent Markup on Selling Price

Jill Sport, owner of Sports, Inc., sells tennis rackets for \$50. To

make her desired profit, Jill needs a 40% markup on selling price.

What is the dollar markup? What do the tennis rackets cost Jill?

S = C + M \$50 = C + .40(\$50) \$50 = C + \$20 -20 - \$20 \$30 = C Dollar Markup

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### Conversion

Formula for Converting Percent Markup on Selling Price to

Percent Markup on Cost

Percent markup on selling price

1- Percent markup on selling price

.2174 = 27.78% 1-.2174

Formula for Converting Percent Markup on Cost to Percent Markup on Selling Price

Percent markup on cost 1+ Percent markup on cost

.2778 = 21.74% 1+.2778

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### Equivalent Markup

Percent markup on Percent markup on cost Selling Price (round to nearest tenth percent)

20 25.0 25 33.3 30 42.9 33 49.3 35 53.8 40 66.7 50 100.0

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### Markdowns

Sears marked down a \$18 tool set to \$10.80. What are the dollar markdown and the markdown

percent? \$10.80 \$7.20 \$18.00 \$18-\$10.80 Markdown Markdown percent = Dollar markdown

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### Pricing Perishable Items

Alvin’s vegetable stand

grew 300 pounds of tomatoes. He expects 5% of the tomatoes to become spoiled and not salable. The tomatoes cost Alvin \$.14 per pound and he wants a 60% markup on cost. What price per pound should Alvin charge for the tomatoes?

TC = 300lb. X \$.14 = \$42.00 TS = TC + TM TS = \$42 + .60(\$42) TS = \$67.20 300 lbs. X .05 = 15lbs \$67.20 = \$.24 285lbs. 300lbs. - 15lbs Selling Price per pound

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### Break Even Analysis - Terminology

Variable costs (VC) – Costs that do change in response

to changes in the sales Fixed Cost (FC) – Costs

that do not change with increases or decreases in

sales

Contribution Margin (CM) – The difference between selling

price (S) and variable costs (VC).

Breakeven Point (BE) – The point at which the seller has covered all costs of a unit and

has not made any profit or suffered any loss.

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### (CM)

Assume Jones Company produces pens that have a selling price (S) of \$2 and a variable cost (VC) of \$.80. Calculate the

contribution margin

CM = \$2,00 (S) - \$.80 (VC) CM = \$1.20

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### (BE)

Jones Company produces pens. The company has fixed cost (FC) of \$60,000. Each pen sells for \$2.00 with a variable cost (VC)

of \$.80 per pen.

Breakeven point (BE) = Fixed Costs (FC)

Contribution margin (CM)

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### Solution:

Dollar markup = S – C Percent markup on cost = = 25%

\$3,000 \$12,000 \$3,000 = \$15,000 - \$12,000

### Check:

C = = = \$12,000 Dollar markup .

Percent markup on cost

\$3,000 .25

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### Solution:

\$20 = C + .40C \$20 1.40C 1.40 1.40 \$14.29 = C =

### Check:

Cost = Selling price _ 1 + Percent markup on cost

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### Solution:

Markup = \$1.50 - \$.42 = \$1.08 \$1.08/.42 = .25714 = 257.14% Check: \$1.50 = \$.42 + 257.14(.42) \$1.50 = \$.42 + 1.08 \$1.50 = \$1.50

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### Solution:

\$120 = C + .30(\$120) \$120 = C + \$36 -36 -36 \$84 = C

### Check:

C = Selling price x (1- Percent markup on selling price) \$84 = \$120 x .70

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### Solution:

Total cost = 100 x \$2.00 = \$200 Total selling price = TC + TM

TS = \$200 + .60(\$200) TS = \$200 + \$120

TS = \$320

Selling price per cookie = = \$3.56