| Dr. John T. Drea | |
| Associate Professor of Marketing | |
| Western Illinois University |
| Defined: the dollar amount added to the cost of sales to get the selling price. | ||
| Two means of calculating markup | ||
| on the basis of selling price | ||
| on the basis of cost | ||
| We’ll be calculating markup on the basis of selling price | ||
| Markup % = (dollar markup)/selling price | ||
| To calculate selling price: | ||
| Selling Price = cost/(1-markup) | ||
| Example: A shirt sells for $25, with a cost of $20. What’s the markup %? | ||
| Markup % = ($ markup)/selling price | ||
| Markup % = 5/25 = 20% | ||
| Example: A shirt costs $12 to produce w/ a 25% markup? What’s the selling price? | ||
| $12/(1-0.25) = $16 selling price | ||
| If the shirt had been marked up 40% instead of 25%, what would be the selling price? | ||
| $12/(1-0.40) = $20 selling price | ||
| 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. | |
| What is the selling price for the manufacturer, wholesaler, and retailer? |
| 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? |
| Defined: the number of times the average inventory is sold in a year |