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Dr. John T. Drea |
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Associate Professor of Marketing |
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Western Illinois University |
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Defined: the dollar amount added to the cost of
sales to get the selling price. |
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Two means of calculating markup |
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on the basis of selling price |
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on the basis of cost |
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We’ll be calculating markup on the basis of
selling price |
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Markup % = (dollar markup)/selling price |
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To calculate selling price: |
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Selling Price = cost/(1-markup) |
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Example:
A shirt sells for $25, with a cost of $20. What’s the markup %? |
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Markup % = ($ markup)/selling price |
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Markup % = 5/25 = 20% |
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Example: A shirt costs $12 to produce w/ a 25%
markup? What’s the selling price? |
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$12/(1-0.25) = $16 selling price |
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If the shirt had been marked up 40% instead of
25%, what would be the selling price? |
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$12/(1-0.40) = $20 selling price |
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Ringo Boot Manufacturing produces a pair of
medium quality boots for $45, and marks up each pair 10% before selling
them to a wholesaler. The
wholesaler’s markup is 20% before selling the boots to a retailer. The retailer marks the boots up 50%
before selling them to the consumer. |
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What is the selling price for the manufacturer,
wholesaler, and retailer? |
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After several months, the retailer still had
several pairs of Ringo boots, so he/she decided to reduce the selling price
by $40. What was the markdown
percentage? |
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Defined: the number of times the average
inventory is sold in a year |
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Notes