1 / 21

Making Sense of Markups

Making Sense of Markups. Pricing Products. Does a retailer make the products it sells? Not Usually –buy from wholesalers/producers Does a Retailer buy a shirt for $15 and sell it to customers for $15? Why or Why not?

harper-johnston
Download Presentation

Making Sense of Markups

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Making Sense of Markups

  2. Pricing Products • Does a retailer make the products it sells? • Not Usually –buy from wholesalers/producers • Does a Retailer buy a shirt for $15 and sell it to customers for $15? • Why or Why not? • If a retailer does not sell its products for more than what it cost them, what would happen?

  3. Rounding in Marketing • Round money to the nearest 100th • $435.34555 • $435.35 • Round Percentages to nearest tenth • 97.567% • 97.6%

  4. Pricing Products • To make a profit, what must a business do with the products they buy to sell? • Mark them up

  5. What is Mark-up • Cost: the initial price paid by retailers/manufacturers for the products they sell • Includes shipping costs • Markup: adding a dollar amount (markup), as a percentage or a dollar amount, to the cost of the products purchased to sell to customers • Used by retailers and wholesalers primarily • RetailPrice: The total price charged for a product sold to a customer, which includes the manufacturer's cost plus a retail markup.

  6. Convert % to a Decimal • Process: Drop the % symbol and move the decimal point 2 places to the left • Example: Convert 75% to a decimal: • Example: Convert 8.5% to decimal • Answer 8.5% = 0.085 • Example: convert 180% • Answer 180% = 1.80

  7. How to Markup • Most difficult thing to determine in business is how to price your product • Should every product a business sells be “marked-up” the same percentage?” • No, every item is different and is based on: • Customer Demand for a product • What competitors are pricing their products for

  8. Calculating Markup Amount • Formula:Markup = Retail Price – Cost • Difference between retail price and cost • The markup may also be called the gross profitor profit margin

  9. Example • Discount Electronics purchased HDTVs for $489.56 each and sells them for $899.99 • What is the markup amount on each TV? • Markup = Retail Price – Cost • Mark up = 899.99 – 489.56 = • 410.43

  10. Calculate Retail Price w/Markup Rate • First calculate the markup amount • Then add the markup amount to the cost to equal your Retail Price Two Step Formula: • Markup = Cost * Markup Rate • Retail Price = Cost + Markup

  11. Example • Wholesale Jewelers, Inc. sells digital watches to jewelry stores for $18.45 each. The suggested retail price is to add a mark-up rate of 160% of cost. What is the suggested retail price? • Markup = * = • Retail Price = += 29.52 47.97 Formula: • Markup = Cost * Markup Rate • Retail Price = Cost + Markup

  12. Let’s Practice • What is 170% of $125 cost • Markup • Retail Price: • 104% of $4329 cost is what? • Markup: • Retail Price:

  13. Calculate Additional Quantity You want to purchase more product than last year. Formula: • Additional Quantity = Original order * converted % • Total Order = Additional Quantity + Original order Example: • You bought 95 hats last year and want to increase your order by 50% more this year. • 95 X .50 = 47.50 • 47.50 + 95 = 142.50 round up/down • How many are you buying? • 143 items

  14. Example • If our school store purchased 144 mittens last year, and this year we would like to purchase 30% more than last year. How many mittens do we need to order this year? • 144 * .30 = 43.2 • 144 + 43 = 187 mittens

  15. Markup as a Rate (Percentage) • The markup rate is the markup expressed as a percent • Businesses usually express the markup in one of two ways: • As a percent of the Retailprice • As a percent of Cost

  16. Markup as a Percent of Retail Price • Businesses usually express the markup as a percent of the retail price (selling price) • Formula:Markup rate = Markup / Retail Price • Example: Luggage costs $54 and you want to sell it for $90, what is the markup rate based on retailprice? • Markup Amount = Retail Price – Cost • $90-$54 = $36 markup • Markup rate = Markup / Retail Price • 36/90 = .40 or 40% markup Rate

  17. Markup as a Percent of Retail Price • A Florist buys roses for $10.99 a dozen and sell them for $24.95 a dozen. What is the markup rate based on the retail or selling price? • Markup = Retail Price – Cost • Markup Amount = 24.95-10.99 = 13.96 • Markup rate = Markup / Retail Price • Markup rate = 13.96/24.95 • Markup rate = .5596 • Markup rate = 56%

  18. Markup as a Percent of Retail Price Our school store purchases a printed Under Armour hooded sweatshirt from Gear for Sports for $37.50. We sell the hooded sweatshirt for $60.00. What is the markup rate based on retail price? • Markup rate = Markup / Retail Price • $60.00 – $37.50 = $22.50 markup • $22.50 / $60.00 = .375 = 37.5%

  19. Markup as a Percent of Cost • Many businesses use the costto figure the markup rate • Formula: Markup rate = Markup / Cost • Example: Rain suit cost $120 and you want to sell it for $162. What is the markup based on cost? • First calculate markup: $162- $120 = 42 • Next calculate markup rate: 42/120 = 35%

  20. Practice • Gear for Sports sells under armour t-shirts to the school store for $13.50 each. They have a suggested retail price computed by marking up the cost by 60%. What is the suggested retail price? • Markup = Cost * Markup Rate • 13.50 * .60 = 8.10 • Selling Price = Cost + Markup • Selling Price = 13.50 + 8.10 = $21.60

  21. Post Test

More Related