CHAPTER 9 Markup and Markdown Copyright 2014 2010

CHAPTER 9 Markup and Markdown Copyright © 2014, 2010, 2007 Pearson Education, Inc. 1

9 -1 Learning Outcomes n Find the cost, markup or selling price when any two of the three are known. n Find the cost, markup, selling price or percent of markup when the percent of markup is based on the cost. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 2

9 -1 -1 Find the cost, markup, or selling price when any two of the three are known Section 9 -1 Markup Based on Cost Markup = Selling price – Cost = Selling price – Markup Copyright © 2014, 2010, 2007 Pearson Education, Inc. 3

Examples… Section 9 -1 Markup Based on Cost n If an item sells for $20 and has a markup of $12, what is the cost of the item? – $8 n If an item costs $16 and is sold for $20, what is the markup of that item? – $4 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 4

9 -1 -2 Cost, markup selling price or percent of markup when percent of markup is based on cost Section 9 -1 Markup Based on Cost n When the markup is based on cost, the cost is the base in the basic percentage formula: P=Rx. B A retailer can buy a shirt from a wholesaler at $10. 00. The retailer will add $5. 00 to the cost. The retailer then sells it for $15. 00. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 5

Find the percent of markup based on the cost HOW TO: when the cost and selling price are known Section 9 -1 Markup Based on Cost Change the equation so the rate of markup is equal to markup divided by the cost. P=Rx. B Cost + Markup = Selling price $10 Rate of cost 100% $5 + Rate of markup ? $15 = Rate of Selling price ? Copyright © 2014, 2010, 2007 Pearson Education, Inc. M = M%(C) 6

Find the percent of markup based on the cost HOW TO: when the cost and selling price are known Section 9 -1 Markup Based on Cost n What do you know? – Rate of cost always equals 100%; – MU and C values n What you are looking for? – Rate of markup and rate of selling price n Solution plan – Rate of markup = Markup divided by cost n Solution – Carry out operation Copyright © 2014, 2010, 2007 Pearson Education, Inc. 7

Find the percent of markup based on the cost HOW TO: when the cost and selling price are known Section 9 -1 Markup Based on Cost n Conclusion – Add rate of MU to C to find rate of SP. Does it make sense? A shirt that costs $10 and sells for $15 has a markup rate of 50% $5 divided by $10 is equal to. 5 or 50% Rate of markup (based on cost) is equal to 50%. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 8

Examples… Section 9 -1 Markup Based on Cost n If Duke’s photography pays $9 for a 5 x 7 photograph. If the photograph is sold for $15, what is the percent of markup based on cost? – 66. 67% n Lilly buys tea from England for $4 a box and sells it in the U. S. for $12 a box. Find the percent of markup based on cost. – 200% Copyright © 2014, 2010, 2007 Pearson Education, Inc. 9

HOW TO: Find the selling price when cost and percent of markup based on the cost are known Section 9 -1 Markup Based on Cost A boutique pays $5 a pair for handmade earrings and sells them at a 50% markup based on cost. Find the selling price of the earrings. Cost $5 Rate of Cost 100% + Mark-up ? Rate of markup + 50% = Selling price ? Rate of SP =150% Copyright © 2014, 2010, 2007 Pearson Education, Inc. 10

HOW TO: Find the selling price when cost and percent of markup based on the cost are known Section 9 -1 Markup Based on Cost A boutique pays $5 a pair for handmade earrings and sells them at a 50% markup based on cost. Find the selling price of the earrings. Cost $5 Rate of Cost 100% + Mark-up ? Rate of markup The rate of the selling price is found+ 50% by adding the rate of cost (100%) to the rate of markup. = Selling price ? Rate of SP =150% Selling price = Rate of selling price (based on cost) x cost Copyright © 2014, 2010, 2007 Pearson Education, Inc. 11

Examples… Section 9 -1 Markup Based on Cost n What is the selling price for a CD which costs the retailer $8. 00 and is marked up 60% based on cost? – $12. 80 n What is the selling price for a set of hairbrushes that costs the salon $12. 00 and is marked up 150% based on cost? – $30 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 12

Find cost when the amount and percent of markup are known HOW TO: Section 9 -1 Markup Based on Cost A DVD movie is marked up $6. 50 which represents a 40% markup based on cost. What is the cost of the DVD? Cost ? RC 100% + MU 6. 50 + RMU 40% = SP ? = RSP 140% Cost = Copyright © 2014, 2010, 2007 Pearson Education, Inc. $16. 25 13

Examples… Section 9 -1 Markup Based on Cost n Find the cost of a box of ballpoint pens which has been marked up $4 and has a markup rate of 30%. – $13. 33 n Find the cost of a pair of shoes that has been marked up $25 and has a markup rate of 50%. – $50 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 14

HOW TO: Find the cost when the selling price and the percent of markup based on cost are known Section 9 -1 Markup Based on Cost A camera sells for $20. The markup rate is 50% of the cost. Find the cost of the camera and the markup. Cost ? RC 100% + Markup ? + RMU 50% = Selling price $20 = RSP 150% Copyright © 2014, 2010, 2007 Pearson Education, Inc. 15

HOW TO: Find the cost when the selling price and the percent of markup based on cost are known Section 9 -1 Markup Based on Cost A camera sells for $20. The markup rate is 50% of the cost. Find the cost of the camera and the markup. Cost = + Markup =Cost Selling = price ? RC 100% ? + RMU 50% $20 = RSP 150% Cost = $13. 33 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 16

Examples… Section 9 -1 Markup Based on Cost n Find the cost and markup of a bicycle tire which sells for $18 and is marked up 50% of the cost. – $12 and $6 n Find the cost and markup of a moisturizing cream which sells for $30 and is marked up 150% of the cost. – Answer: $12 and $18 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 17

EXERCISE SET A Practice 1. Peacock’s Jewelry buys a pair of stylish earrings for $52 and sells them for $129. What is the markup? M=S C M = $129 $52 M = $77 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 18

EXERCISE SET A Practice 2. Old Towne Hardware pays $12. 15 for lightbulbs that have a 35, 000 -hour life. The bulbs sell for $29. 99. What is the percent of markup based on cost? Round to the nearest tenth of a percent. M=S C M = $29. 99 $12. 15 M = $17. 84 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 19

EXERCISE SET A Practice 3. A computer table sells for $198. 50 and costs $158. 70. a. Find the markup. M = S C = $198. 50 $158. 70 = $39. 80 b. Find the rate of markup based on the cost. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 20

EXERCISE SET A Practice 4. Paradise Solar Lights marked up each box of four-color changing LED solar accent lights $8. 25. The 60% markup of $8. 25 was based on cost. Find the cost and selling price of each box of lights. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 21

9 -2 Learning Outcomes n Find the cost, markup, selling price or percent of markup when the percent of markup is based on the selling price. n Compare the markup based on cost with the markup based on the selling price. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 22

9 -2 -1 Section 9 -1 Cost, markup, selling price, or percent of markup when percent of markup is based on selling price. Markup Based on Selling Price and Markup Comparisons n In the previous section, the markup based on cost, the rate of cost was always 100%. n In this section, the markup based on selling price, the rate of selling price is always 100%. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 23

Find the amount of markup and the percent of markup HOW TO: Section 9 -2 Markup Based on Selling Price and Markup Comparisons A calculator costs $5 and sells for $10. Find the amount of markup Find the rate of markup based on the selling price. and the percent of markup Cost + Markup $5 ? Rate of Cost + Rate of Markup ? ? = Rate of = Selling Theprice markup$10 amount is the difference 100% Selling price between the selling price and the cost. MORE Divide the markup by the selling price to get the difference and then multiply it by 100%, to get the rate of markup. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 24

Examples… Section 9 -2 Markup Based on Selling Price and Markup Comparisons Find the amount of markup and the percent of markup (based on SP) for the following items: n A dog collar which costs $4 and sells for $10. – $6 and 60% n A notebook which costs $1. 25 and sells for $2. – $. 75 and 37. 5% Copyright © 2014, 2010, 2007 Pearson Education, Inc. 25

Selling price when amount of markup and percent HOW TO: of markup based on the selling price are known Section 9 -2 Markup Based on Selling Price and Markup Comparisons Subtract the percent of markup from 100% to obtain the rate of cost. Divide the markup by the rate of markup based on SP. Find cost & selling price if a handbag is marked up $5 with a 20% markup rate based on selling price MORE Cost ? RC ? + MU $5 +RMU 20% = SP ? = RSP 100 % Copyright © 2014, 2010, 2007 Pearson Education, Inc. 26

Selling price when amount of markup and percent HOW TO: of markup based on the selling price are known Section 9 -2 Markup Based on Selling Price and Markup Comparisons Subtract the percent of markup from 100% to obtain the rate of cost. Divide the markup by the rate of markup based on SP. Find cost & selling price if a handbag is marked up $5 with a 20% markup rate based on selling price MORE Cost ? RC ? + MU $5 +RMU 20% SP = $25; C = $25 – $5 = $20 = SP ? Copyright © 2014, 2010, 2007 Pearson Education, Inc. = RSP 100 % 27

Examples… Section 9 -2 Markup Based on Selling Price and Markup Comparisons Find the selling price with the amount of markup based on selling price for the following items: n A cell phone which has been marked up $50 and with a markup rate of 33% based on selling price. – $150 n A pair of socks which has been marked up $3 and with a markup rate of 60% based on selling price. – $5 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 28

HOW TO: Selling price when cost and percent of markup based on selling price are known Section 9 -2 Markup Based on Selling Price and Markup Comparisons Subtract the rate of markup from 100% to determine the rate of cost. Selling price = Copyright © 2014, 2010, 2007 Pearson Education, Inc. 29

Selling price when cost and percent of markup based on selling price are known HOW TO: Section 9 -2 Markup Based on Selling Price and Markup Comparisons Find the selling price and markup for a pair of jeans which costs the retailer $28, and has a markup based on selling price of 30% Cost $28 RC ? + MU ? + RMU 30% = SP ? = RSP 100% MORE Copyright © 2014, 2010, 2007 Pearson Education, Inc. 30

Selling price when cost and percent of markup based on selling price are known HOW TO: Section 9 -2 Markup Based on Selling Price and Markup Comparisons Find the selling price and markup for a pair of jeans which costs the retailer $28, and has a markup based on selling price of 30% Cost SP = $28 RC ? + MU ? + RMU 30% = SP SP = ? = RSP 100% MORE SP = $40; MU = $40 – $28 = $12 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 31

Examples… Section 9 -2 Markup Based on Selling Price and Markup Comparisons Find thethe selling price with themarkup amount(based of markup Find selling price and based on selling for following the following items: on selling price)price for the items: n A handheld calculator that costs the retailer $2 and is marked up 60%. – $5 and $3 n A box of gourmet chocolates that costs $8 a box and is marked up 75%. – $32 and $24 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 32

HOW TO: Section 9 -2 Cost when selling price and percent of markup based on selling price are known Markup Based on Selling Price and Markup Comparisons Subtract the rate of markup from the rate of selling price to determine the rate of cost. Cost = Rate of Cost x Selling Price Copyright © 2014, 2010, 2007 Pearson Education, Inc. 33

HOW TO: Cost when selling price and percent of markup based on selling price are known Section 9 -2 Markup Based on Selling Price and Markup Comparisons Cost ? RC ? + MU ? + RMU 25% = SP $3. 00 = RSP 100% Find the markup and cost of a box of pencils that sells for $3 and is marked up 25% of the selling price First, find the rate of cost: 100% – 25% = 75% C = $3 x 75% or. 75 = $2. 25 MU = SP – C = $3 – $2. 25 = $0. 75 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 34

Compare the markup based on cost with markup based on selling price 9 -2 -2 Section 9 -2 Markup Based on Selling Price and Markup Comparisons Find the markup based on cost and the markup based on selling of a computer that costs $1, 500 and sells for $2, 000. Cost 1500 + MU 500 = SP 2000 RC +R MU =RSP 100% Cost 1500 ? + MU 500 ? = SP 2000 RC ? +R ? MU =RSP 100% Percentage of markup based on cost is 33. 33%. Percentage of markup based on selling price is 25%. What accounts for the difference? Copyright © 2014, 2010, 2007 Pearson Education, Inc. 35

Markup Section 9 -2 Markup Based on Selling Price and Markup Comparisons Converting a markup based on selling price to a markup based on cost. The markup rate based on cost is equal to the markup rate based on selling price divided by 100% minus the markup rate based on selling price. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 36

Markup Section 9 -2 Markup Based on Selling Price and Markup Comparisons Converting a markup based on cost to a markup based on selling price. Markup rate based on selling price is equal to the markup rate based on cost divided by the markup rate based on cost plus 100%. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 37

EXERCISE SET A Practice 1. A hole punch costs $40 and sells for $58. 50. a. Find the markup. M = S C = $58. 50 $40 = $18. 50 b. Find the rate of markup based on selling price. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 38

EXERCISE SET A Practice 2. A briefcase is marked up $15. 30, which is 30% of the selling price. a. Find the selling price of the briefcase. b. Find the cost. C = S M = $51 $15. 30 = $35. 70 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 39

EXERCISE SET A Practice 3. A desk organizer sells for $35, which includes a markup rate of 60% based on the selling price. a. Find the markup based on selling price. M = M%(S) M = 60%($35) M = 0. 6($35) M = $21 b. Find the cost. C=S M C = $35 $21 C = $14 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 40

EXERCISE SET A Practice 4. A reclaimed T-shirt scarf sells for $32. 00 and costs $20. 00. Find the rate of markup based on cost and based on selling price. Round to the nearest tenth of a percent. M=S C = $32 $20 = $12 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 41

EXERCISE SET A Practice 5. A chest is marked up 63% based on cost. What is the rate of markup based on selling price? Copyright © 2014, 2010, 2007 Pearson Education, Inc. 42

9 -3 Learning Outcomes n Find the amount of markdown, the reduced (new) price, and the percent of markdown. n Find the final selling price for a series of markups & markdowns. n Find the selling price for a desired profit on perishable and seasonal goods. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 43

9 -3 -1 Section 9 -3 Find the Amount of Markdown, the Reduced (New) Price, and the Percent of Markdown, Series of Markdowns, and Perishables n The markdown is found by subtracting the new price from the original price. The original selling price is always 100%! Copyright © 2014, 2010, 2007 Pearson Education, Inc. 44

9 -3 -1 Find the Amount of Markdown, the Reduced (New) Price, and the Percent of Markdown Section 9 -3 Markdown, Series of Markdowns, and Perishables n The markdown rate is found by dividing the markdown by the original price and multiplying that figure by 100%. $ % Original Selling Price (S) – Markdown $36 100% $6 ? = New Price $30 ? Copyright © 2014, 2010, 2007 Pearson Education, Inc. 45

9 -3 -2 Section 9 -3 Find the Final Selling. Price for a Series of Markups and Markdowns Markdown, Series of Markdowns, and Perishables n Each new price becomes the base. n For markups based on cost, multiply the base by 1 + the rate of markup. n For markdowns, multiply the base by the complement of the rate of markdown. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 46

An Example… Section 9 -3 Markdown, Series of Markdowns, and Perishables n Find the final price for an item that cost $18, was marked up by 20% and then was marked down 33%; and was subsequently marked up 10% and finally marked down by 50% for clearance. – Answer: $7. 91 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 47

9 -3 -3 Section 9 -3 Find the Selling Price for a Desired Profit on Perishable and Seasonal Goods Markdown, Series of Markdowns, and Perishables n Determine the cost by multiplying the unit price by the quantity. n Determine the markup rate and amount and add to the cost. n Establish the expected to sell amount. n Divide the total selling price by the expected to sell amount. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 48

An Example… Section 9 -3 Markdown, Series of Markdowns, and Perishables Mr. Green buys 100 lb of tomatoes at $0. 15/ lb. and establishes a markup rate of 120% based on cost. What is the total selling price? TSP = C (100 x 0. 15 = $15) + MU (C or $15 x 120% = $18); TSP = $15 + $18 = $33 He expects to sell 90%. How many pounds is he expecting to sell? 100 lbs. x 90% or 0. 9 = expected to sell = 90 lbs. Divide the TSP by “expected to sell” number. $33 ÷ 90 = SP = $0. 37 lb. (rounded) Copyright © 2014, 2010, 2007 Pearson Education, Inc. 49

EXERCISE SET A Practice 1. A portable DVD player was originally priced at $249. 99 and was reduced by 20%. a. Find the markdown. M = 0. 2($249. 99) = $50 b. Find the sale (new) price. Reduced price = $249. 99 $50 = $199. 99 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 50

EXERCISE SET A Practice 2. Michelle Dockter has selected a Sonic electric toothbrush that is on sale for 25% off. She also has a store coupon that reads “Take 15% off any already reduced price. ” How much will she pay for the toothbrush if it was originally priced at $79. 99? What is the rate of reduction? Net decimal equivalent = (0. 75)(0. 85) = 0. 6375 Reduced price = 0. 6375($79. 99) = $50. 99 Total rate of reduction = 1 0. 6375 = 0. 3625(100%) = 36. 25% Copyright © 2014, 2010, 2007 Pearson Education, Inc. 51

Practice Test Copyright © 2014, 2010, 2007 Pearson Education, Inc. 52

PRACTICE TEST 2. A mixer sells for $109. 98 and has a markup of $36. 18. Find the cost. C = 109. 98 36. 18 C = 73. 80 4. A computer stand sells for $385. What is the markup if it is 45% of the selling price? What is the cost? M = M%S M = (0. 45)385 M = 173. 25 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 53

PRACTICE TEST 6. The reduced price of a dress is $54. 99. Find the original selling price if a reduction of 40% has been taken. Reduced price % = 100% 40% = 60% Copyright © 2014, 2010, 2007 Pearson Education, Inc. 54

PRACTICE TEST 10. A refrigerator that costs for $489. 99 was marked up $100. What is the selling price? S=C+M S = 489. 99 + 100 S = 589. 99 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 55

PRACTICE TEST 12. A wallet was originally priced at $49. 99 and was reduced by 30%. Find the markdown and the sale price. Find the markdown: Find the sale (new) price: M = M%(S) M = 30%($49. 99) M = 0. 3($49. 99) M = $15 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 56

PRACTICE TEST 14. A file cabinet originally sold for $215 but was damaged and had to be reduced. If the reduced cabinet sold for $129, what was the rate of markdown based on the original selling price? M=S C M = 215 129 M = 86 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 57

PRACTICE TEST 16. Brenda Wimberly calculates the selling price for all produce at Quick Stop Produce. If 400 pounds of potatoes were purchased for $0. 13 per pound and 18% of the potatoes were expected to spoil before being sold, determine the price per pound that the potatoes must sell for if a profit of 120% of the purchase price is desired. Total cost = 0. 13(400) = 52 M = 1. 2(52) = 62. 40 S = 52 + 62. 40 S = 114. 40 % expected to sell = 100% - 18% = 82% Pounds expected to sell = 82%(400) = 328 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 58

PRACTICE TEST 18. A CD costs $0. 90 and sells for $1. 50. Find the rate of markup based on selling price. Round to the nearest whole percent. M=S C M = 1. 50 0. 90 = 0. 60 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 59

PRACTICE TEST 20. Becky Drewery purchased a small refrigerator for her dorm room for $159. The refrigerator cost $127. Find the rate of markup based on cost and based on the selling price. Round the rate to the nearest tenth of a percent. M = 159 127 = 32 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 60

PRACTICE TEST 22. A 10 -ream case of printer paper sells for $39. 99 and has a 47% markup based on the selling price. Find the markup and cost of one case of paper. M = M%(S) M = 47%(39. 99) M = 0. 47(39. 99) M = 18. 80 C=S M C = 39. 99 18. 80 C = 21. 19 Copyright © 2014, 2010, 2007 Pearson Education, Inc. 61

PRACTICE TEST 24. A copy machine is marked up 82. 2% based on the cost. Find the markup rate based on selling price. Round to the nearest tenth percent. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 62

PRACTICE TEST 26. A stainless steel patio heater is marked up $87 over cost. The markup rate of 48% is based on cost. Find the cost and selling price of the heater. Find the rate of the selling price. Copyright © 2014, 2010, 2007 Pearson Education, Inc. 63