CHAPTER 6 :

MARK UP & MARK DOWN

6.1 Mark Up
6.2 Conversion of
Mark Up Percent
6.3 Mark Down
6.4 Profit & Loss
Objectives

Analyze and solve

problems on
important factors in
managing a business:
buying products and
selling products
 6.1 Mark Up
Mark up – Introduction
An important principle in retail business is the
proper pricing of its merchandise.
Wrong pricing may lead to small profit or heavy
loss.
The cost price is the original price of the
merchandise paid by the retailer.
The retailer must add an additional amount
called the markup to its cost to cover its
business and to provide a profit.
 6.1 Mark Up
Mark up – Definition
The sum of this cost and markup is the retail (or
selling) price.
price
In other words, markup (or gross profit or gross
margin) is the difference in the retail price and
cost price;
price
R=C+M
R = retail (selling) price
C = cost price
M = markup or gross profit
EXAMPLE: Retail/Selling Price

1. A math book cost the store manager P 161 and he

marked it up another P 89. What is the selling price of
the book?

Solution

Given: C = P 161 M = 89

R=C+M
=P161 + 89
= P 250
EXAMPLE: Retail/Selling Price

2. AUS Electronics pays P 37,200 for a digital

camcorder. If the markup is 19% on the cost, find the
retail price.
Solution

Given: C = P37,200 MRsp = 0.19

R = C + (C x MRc)
= 37,200 + (37,200 x 0.19)
= 37,200 + 7,068
= P44, 268
EXAMPLE: Markup Value

1. RFS Sports Inc. sells home-gymnasium package for

P 175, 000 and maintains a markup of 37% on selling
price. Find the markup value

Solution

Given: R = P 175,000 MRsp = 0.37

Msp = MRsp x R
= 0.37 x 175,000
= 64,750
EXAMPLE: Markup Value

2. The grocer purchase a gallon of mineral water for P

49.50 and sells it for P 56.75. What is his gross profit
(markup)?

Solution

Given: R = P 56.75 C = 49.50

R=C+M
M = SP – C
56.75 – 49.50
7.25
EXAMPLE: Cost

1. The washing machine has a selling price of P 4,792.

It had been marked up P 1,248. What was its cost?

Solution

Given: SP = P4,792 M = P1,248

SP = C + M
C = SP – M
= P4,792 - P1,248
= 3,544
EXAMPLE: Cost

2. A hot-and-cold water dispenser sells for P 8,021.50.

The markup on it is 31.5% of the cost. Find the cost.

Solution

Given: SP = P 8,021.50 MR = 0.315

C = SP/ (1 + MR)
= 8,021.50/ (1+0.315)
= 8,021.50/ 1.315
=6,100
EXAMPLE: Markup Rate

1. A laser printer costing P 8,750 is sold for P 12,250.

Find the markup rate based on cost.

Solution
Given: C = 8,750

MRc = Mc/C
(SP – C) / C
= (12,250 – 8,750) / 8,750
= .40 or 40%
EXAMPLE: Markup Rate

2. A wall clock cost P 608.40 and sell for P780. What

is the percentage of markup based on selling price?

Solution
Given: C = P608.40 SP = P789

MRsp = Msp / SP
(SP – C) / SP
= (780 – 608.40) / 780
= .22 or 22%
Exercises
If an item cost P 67.50 and is marked up another
P12.50, what would be the selling price?

Solution P 80

A pair of rubber shoes costing P 3,490 has a

markup rate of 62%. Find the retail price.
Solution P 5,653.8
Exercises
If a merchandise costing P 4,290 is sold for P
6,140, what is the markup rate?

Solution 43.12%
Find the markup on air-soft guns made in
Taiwan if the cost is P 5,700 and the markup is
29% of selling price.
Solution
P 1,653
Exercises
If an electric flat iron was sells for P 944.64 and
is marked up with 15.2% on the cost. What is
the cost?
Solution P 1,088.23

A wrist watch cost P 1, 476 is being sold for P

3,600. Find the markup rate based in cost
Solution
143.90%
 6.3 Mark Down
Mark down – Definition
Markdown is a decrease in the selling
price.
It is the difference in the old retail price
and the new retail price; that is
MD = OP – NP
MD = mark down
OP = old retail price
NP = new retail price
 6.3 Mark Down
Mark down – Percent
Prices sometimes are markdown due to
many reasons:
to face stiff competition
to encourage purchases in bulk
to dispose off old, damaged or obsolete
stocks
to close a line of merchandise.
EXAMPLE
1. What is the markdown and the sale price on an
antique jar that has a regular price of P 35,800 and
is on sale for 26% off the regular price

Solution

Given: Regular Price = P 35,800 Markdown Rate = 0.26

MD = RP X MDr SP = RP - MD
= P 35,800 x 0.26 = P 35,800 - P 9,308
= P 9,308 = P 26,492
EXAMPLE

3. If all the merchandise, with a selling price of P7,800

is to be sold for P 6,474. Find the markdown.

Solution

Given: Regular Price = P7,800 Sale Price = P6,474

SP = RP - MD
MD = RP – SP
= P 7,800 - P6,474
= 1,326
EXAMPLE
4. Sofia has some shirt in her boutique that have not
been sold. She decided to mak them down from P
850 to P 552.5, what percentage did she mark them
down?
Solution

Given: Regular Price = P850Sale Price =P 552.50

MDr = MD/RP
(RP - SP) /RP
= (850 – 552.50)/850
=297.5/850
=0.35 or 35%
 6.4 PROFIT & LOSS
Not all businesses make money.
A business incurs operating expenses, OE such
as: rents, lighting, wages, commissions, bonus
and other operating expenses.
The markup must be able to cover the operating
expenses.
If markup is greater than operating expenses,
expenses
net profit is achieved.
achieved
However if markup is less than operating
expenses,
expenses loss is incurred.
incurred
 6.4 PROFIT & LOSS

If the retail price just covers the cost price and

the operating expenses,
expenses then it does not make
any profit nor incur any loss.
loss
This price is called the breakeven price,
price that is;
Breakeven price = cost price + operating
expenses
The earlier markup equation, now can be
expressed as follows;
Retail price = Cost + Net profit + Operating
expenses

OR R  C  NP  OE