CHAPTER 8: MARKUP AND MARKDOWN

COST / COST PRICE (C)

 The amount paid to the manufacturer or supplier after trade and cash discounts have been taken.
 Shipping and insurance charges are included in cost.
 The original price of the goods paid by the retailer.

RETAIL PRICE / SELLING PRICE (SP)

 The amount received when the item is sold.

 The sum of cost and markup.

SP  C  M

SP - Selling Price (in RM)

C - Cost Price (in RM)
M - Markup(in RM or %)

MARKUP / GROSS PROFIT / GROSS MARGIN / MARGIN (M)

 The difference between cost price and selling price.

i. Based on cost price

Markup bas ed on cos t price  %  cos t price

 RM ______

M
Markup per cent based on cos t price   100 %
C
 ______%

ii. Based on selling price

Markup bas ed on sell ing price  %  selling pr ice

 RM ___ ___

M
Markup per cent based on sellin g price   100%
SP
 ______%

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Example 1: Exercise 1:

A motorcycle cost at RM4500. Find the selling Arina bought a handbag at RM120. She
price if the seller wants a 25% markup based on: plans to sell it. Find the selling price if the profit is
40% based on:
a) cost price
a) cost price
SP  C  MU
SP  4,500  0.25  C
SP  4,500  0.25  4,500
 RM 5,625
b) retail price
b) retail price

SP  C  MU
SP  4,500  0.25  SP
SP  0.25SP  4,500
0.75SP  4,500
4,500
SP 
0.75
 RM 6,000

Example 2: Exercise 2:

Fiqri purchased a laser printer toner that cost A retailer bought 25 dresses. He made a gross profit
RMX. He then sold the toner at RM396.75 which of 45% based on cost when he sold the dress at
made a gross profit of 15% of the cost. Find the RM172.73. Find the total cost.
value of X.

SP  C  MU
396 .75  X  0.15  X
396 .75  1.15 X
X  RM 345

Example 3 Example 4

Hias Cantik Pottery Shop purchased 100 hand- A retailer purchased 10 units of vacuum cleaners at
painted vases at RM4,500. However, 5 of them a total price of RM3,500. The retailer plan 2 units of
was damaged. If the shop wanted a markup of them will be sold at a reduced price of RM300. If the
25% of the cost. Find the selling price retailer is to maintain a gross profit of 25% based on
of a single vase. overall cost, calculate the regular price per unit of
vacuum cleaner.
SP  C  MU
SP  4,500  0.25  C
SP  4,500  0.25  4,500
 5,625

Selling price per unit=5,625/95=RM59.11

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 Conversion of Markup Percent

i. Converting markup on selling price to markup on cost price.

 Markup percent based on cost price

% M SP
%M C 
1  % M SP

ii. Converting markup on cost price to markup on selling price.

 Markup percent based on selling price

%M C
% M SP 
1  %M C

Markup percent at the regular price (or old selling price)

Re gular Pr ice-Cost
  100%
Re gular Pr ice
 ___________ %

Example 1: Example 2:

The markup percent based on retail price of an item The markup percent based on cost price of an item
is 20%. What is the markup percent based on cost is 10%. What is the markup percent based on retail
price? price?

%M SP
%M C 
1  %M SP
0 .2

1  0 .2
 0.25 x100 %
 25 %

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MARKDOWN (MD)

 A decrease in the selling price.

 The difference between the old selling price and the new selling price.
 It is based on old selling price.

SPn  SP0  MD
MD  SP0  SPn

SPn - New Selling Price (in RM)

SP0 - Old Selling Price/Original Price/Regular Price (in RM)
MD - Markdown(in RM or %)

 Markdown percent / rate

MD
% MD   100%
SP0
SP0-SPn
  100%
SP0

 Maximum Markdown

max MD  SPo  BEP

 Maximum Markdown percent

max MD
% max MD  100%
SP0
SP0 -BEP
 100%
SP0

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Example 1: Exercise 1:

At an electrical fair, Kool Co. marked down the Best Furniture Sdn. Bhd. marked down the
price of an electric fan by 10% and sold it at price of a sofa set by 20% and sold it at
RM145.80. Find the original price of the fan. RM2,500. Find the original price of the sofa set.

MD
% MD   100%
SP0
SP0 -SPn
  100%
SP0
SP0 -145.80
10%   100%
SP0
SP0 -145.80
0 .1 
SP0
0.1SP0  SP0  145.80
145.80  1SP0  0.1SP0
145.80  0.9 SP0
SP0  RM 162

BREAKEVEN PRICE / BREAKEVEN POINT (BEP)

 If the selling price just covers the cost price and operating expenses, then it does not make any
profit or loss.

BEP  C  OE

BEP - Breakeven Price/Breakeven Point (in RM)

C - Cost Price (in RM)
OE - Operating Expenses /Overhead Expenses (in RM)

Example 1: Exercise 1:

Luqman purchased a laser printer toner that cost
RM345. He then sold the toner and made a gross
profit of 15% of the cost. If the operational cost is
7% of the selling price, find the selling price and
the breakeven price.
Indah Home Enterprise bought a sofa set at
RM2,250 and sells it at RMX. At this selling price,
the company will get profit of 70% based on cost. If
the operating expenses is 20% based on cost, find
the selling price and the breakeven price.

SP  C  M
 345  0.15 xC
 345  0.15 x 345
 RM 396 .75

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 BEP  C  OE
 345  0.07 xSP
 345  0.07 x 396 .75
 RM 372 .77

NET PROFIT AND LOSS

if M  OE or if SP  BEP  net profit

if M  OE or if SP  BEP  loss
if M  OE  breakevenprice

Selling Pr ice  Cost Pr ice  Markup

SP  C  M


Selling Pr ice  Cost Pr ice  Net Pr ofit  Operating Expenses
SP  C  NP  OE

Markup  Net Pr ofit  Operating Expenses

M  NP  OE

Example 1: Exercise 1:

Alinda Enterprise bought a sofa set for RM3,500. A retailer purchased 10 units of vacuum cleaners at
The operating expenses incurred were RM800. If the total price of RM3,500. He then sold the
the company wants a gross profit of 65% based on vacuum cleaners with operating expenses of 10%
cost, based on cost and made a gross profit of 25%
based on cost.
i) find the net profit and the retail price.
i) find the net profit and the retail price.
C=3500, OE=800, M=0.65C
M=NP+OE
NP= M-OE
= 0.65(3500)-800
= RM1475.00

S = C + OE + NP
S = 3500+800+1475
=RM 5775.00

SP=C+M
=3500+0.65C
=3500+0.65X3500
=RM5775

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ii) find the maximum percentage of markdown. ii) find the maximum percentage of markdown.

BEP= C+OE
= 3500+800
= 4300

Max MD = OSP-BEP
= 5775-4300
=RM1475

max MD
% Max MD=  100 %
OSP

1475
=  100 %
5775
= 25.54%

iii) find the profit/loss if the sofa set was sold at iii) find the profit/loss if the sofa set was sold at
RM3850. RM4,000.

S<BEP= Loss

 3850-4300= - RM430= loss