Topic: Purchasing Decision

Selling Price (S.P): is the price for which an item is being sold taking into account of any
discount that might apply.
Marked Price (M.P): is the initial/original price of an item tag/marked by the shopkeeper
which will be always higher than the cost price of an item that they bought.
Cost Price (C.P): is the cost of an item that the customer pays to the shopkeeper/dealer.
Discount: is the amount that is taken off the marked price to encourage a purchase.
Mark up: is the amount that is increased from the cost price to an item by the shopkeeper to
make profit.
Commission: is the amount that the sales person earns based on his/her sales.
Commission is intended to encourage the salesperson to bring in more business.
Discount %: is the percentage of the marked price that the actual discount represents.
Mark up %: is the percentage of the cost price that the mark up represents.
Rate of Commission: is the percentage of sales that the sales person earns.
Formulae that need to be remembered from Purchasing Decision and its related term
Sl.# Formulae Abbreviated in Short as
1. Selling Price = Marked Price – Discount OR S.P = M.P – Discount OR
Selling Price = [100% − S.P = [100%−Discount%]×M.P
Discount%]×Marked Price
2. Discount = Marked Price − Selling Price Discount = M.P − S.P
3. Marked Price = Selling Price + Discount M.P = S.P + Discount
4. Mark up = Marked Price − Cost Price Mark up = M.P − C.P
5. Marked Price = Cost Price + Mark up M.P = C.P + Mark up
6. Cost Price = Marked Price − Mark up C.P = M.P − Mark up
7. Commission = Rate of Commission ×Total Commission = % Commission×Total sales
sales
8. 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡
Discount % = × 100 Discount % = × 100
𝑀𝑎𝑟𝑘𝑒𝑑 𝑃𝑟𝑖𝑐𝑒 𝑀.𝑃
9. 𝑀𝑎𝑟𝑘 𝑢𝑝 𝑀𝑎𝑟𝑘 𝑢𝑝
Mark up% = × 100 Mark up% = × 100
𝐶𝑜𝑠𝑡 𝑃𝑟𝑖𝑐𝑒 𝐶𝑜𝑠𝑡 𝑃𝑟𝑖𝑐𝑒
10. 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛 𝐶𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛
Rate of Commission = × 100 Commission% = × 100
𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠
11. Total Income = Salary + Commission Total Income = Salary + Commission
Note: It is very important to list what things are given in the question and it is vital to analyze
what could be found using the given things and then what next, we can find after getting one
thing to find another thing. First, read the question carefully, understand it and then do it.