Buying and Selling
BUSINESS MATHEMATICS
Learning Outcomes
• Define cost, initial markup or mark-on, additional
markup, markup cancellation, and markdown;
• Differentiate markup and margin;
• Compute for markup based on cost;
• Compute for markup based on selling price; and
• Convert markup based on cost to markup based on
selling price and vice versa.
What is the primary purpose of
operating a business?
To generate profit
MARKUP 1
LEARNING OUTCOMES
1. Define markup
2. Illustrate how markup is obtained
3. Differentiate markup from margins
4. Describe how gross margins is used in sales
MARKUP
•Amount of money added to cost to cover
the operating expenses and provide a
profit to the business.
•The amount by which the cost of a
product is increased in order to derive the
selling price.
SELLING PRICE
•The price at which the item is
actually sold.
COST
•The price that includes all the
expenses in the production of the
product.
MARKUP RATE
•A percentage of the cost to be
added to determine the selling
price of the product.
How to determine the MARKUP VALUE?
• Markup percentage varies greatly depending on the nature of
the business. There are no specific markup percentage that
applies to all, but there may be an average for a particular
business.
Some of the things to be considered:
How much profit does the business want?
How much does the business need to cover all expenses?
How much the competitor sells their product or service?
Who are your target market?
What quality of service would you like to provide?
TAKE NOTE!
•The selling price must be REASONABLE,
COMPETITIVE & SUITABLE to its target
market, and will not make the business
lose a money.
How to compute for MARKUP?
FORMULA IN FINDING THE SELLING PRICE WITH MARKUP
BASED ON COST
Step 1: Markup = Markup Rate x Cost 𝑴𝑼 = 𝑴𝑼𝑹 𝒙 𝑪
Step 2: Selling price = Cost + Markup 𝑺𝑷 = 𝑪 + 𝑴𝑼
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 −𝐶𝑜𝑠𝑡 𝑺𝑷 − 𝑪
Markup Rate = 100 x ( ) 𝑴𝑼𝑹 = 𝒙 𝟏𝟎𝟎
𝐶𝑜𝑠𝑡 𝑪
Sample Problem
•Finding the selling price
Mady bought bags for her store that cost
K44.00 each. To make her desired profit,
Mady must markup each bag 32% on cost.
What must be the selling price of the bag?
Sample Problem
•Finding the cost
A pair of running shoes is marked up at
K153.60 which is 60% markup based on cost. What
is the cost of the shoes? Find the markup on the
running shoes.
Sample Problem
•Finding the markup rate
A laser printing costing K639.99 is sold for
K895.99. Find the markup rate based on cost?
How to compute for MARKUP?
FORMULA IN FINDING THE SELLING PRICE WITH MARKUP
BASED ON SELLING PRICE
Step 1: Markup = Markup Rate x Selling price 𝑴𝑼 = 𝑴𝑼𝑹 𝒙 𝑺𝑷
Step 2: Cost = Selling Price - Markup 𝑪 = 𝑺𝑷 − 𝑴𝑼
Sample Problem
•Finding the cost
What is the cost of an item that has a
selling price of K17.50 and a markup rate of
60% based on selling price?
Sample Problem
•Finding the markup
MPE Sports Inc. sells home-gymnasium
package for K12,755.96 and maintains a
markup of 37% on selling price. What is the
markup value?
Converting Markup based on cost to
Markup based on selling price
If the markup cost is 40%, find the markup on
selling price.
Converting Markup based on selling
price to Markup based on cost
If the markup on selling price is 40%, find the
markup on cost price.
MARKUP &
1
GROSS MARGIN
MARKUP GROSS MARGIN
•added price
to the
product to
cover its
cost and to
earn profit
MARKUP GROSS MARGIN
•A term that relates
the markup and
selling price
GROSS MARGIN
•It is a percentage that presents
how much the earned profit of a
business based on its revenue.
•It is a quick indicator of the
profit available to cover costs.
GROSS MARGIN
𝑴𝒂𝒓𝒌𝒖𝒑(𝑺𝒆𝒍𝒍𝒊𝒏𝒈 𝒑𝒓𝒊𝒄𝒆 − 𝑪𝒐𝒔𝒕)
𝑮𝒓𝒐𝒔𝒔 𝑴𝒂𝒓𝒈𝒊𝒏 =
𝑺𝒆𝒍𝒍𝒊𝒏𝒈 𝒑𝒓𝒊𝒄𝒆
Sample Problem
•Finding the gross margin (gross profit margin)
A cosmetics retailer puts a storewide markup
of 40% on its makeup products. If the cost of a
lipstick is K10.50, compute for the gross margin
and interpret its value.
A DVD movie was marked up
K9.45, which was a 40% markup
based on cost. What was the
cost of the DVD? What is the
selling price?
Independent Exercise
ABC Inc. buys travel mugs for
K3.33 and sells them for K5.34.
Find the rate of markup based
on cost.
Independent Exercise
Key Takeaways
PART A. Show your computations in your Math exercise book.
Complete the following table. (12 marks)
Selling Price Cost Markup %MUcost %Musp
K34.97 1. ______ K8.74 2. ______ 3. ______
4. ______ K21.86 K8.74 5. ______ 6. ______
7. ______ K29.14 8. ______ 30% 9. ______
K36.43 10. ______ 11. ______ 12. ______ 50%
Seat Work # 3 __ April 2021
PART B. Convert the following markup rates as indicated. (4 marks)
%MUcost %Musp
30% 13. _____
14. _____ 180%
60% 15. _____
16. _____ 200%
Seat Work # 3 __ April 2021
