SEM 1
Section 4.03
Day 2
1. Cost of Merchandise Sold – The amount a retailer actually pays for merchandise.
2. Discounts- A reduction in the selling price offered by manufacturers and distributors
to their customers to encourage prompt payment and stimulate purchasing.
3. Allowances- A manufacturer often gives free merchandise for large orders as a means
of goodwill to encourage prompt payment and stimulate purchasing.
4. Profit- The amount left from revenue (sales) after the costs of merchandise and
expenses have been paid.
5. Markup- The difference between retail price and cost.
6. Gross profit- A business’s income minus the cost of goods sold.
7. Net Profit- The amount that is left after all expenses have been paid by the business.
Basic Markup Calculations
Cost (C) + Markup (MU) = Retail Price (RP) this basic formula can be changed as follows:
Retail Price (RP) – Cost (C) = Markup (MU)
Retail Price (RP) – Markup (MU) = Cost (C)
Example:
Nintendo 3DS
Cost (C) + Markup (MU) = Retail Price (RP)
$120 + $100 = $220
Football
Retail Price (RP) – Cost (C) = Markup (MU)
$ 79.99 - $12.00 = $67.99
Jeans
Retail Price (RP) – Markup (MU) = Cost (C)
$49.50 - $39.50 = $10.00
Markup Calculation Practice (1-6 together)
1. A microwave oven costs a business $250.00. The markup is $125.00. Determine the
retail price. 250.00 + 125.00 = $375.00
2. A pair of jeans costs a business $14.00. The jeans have a markup of $10.00.
Determine the retail price. 14.00 + 10.00 = $24.00
3. A pair of shoes costs a business $20.00. The retail price is $35.00. Determine the
markup. 35.00 – 20.00 = $15.00
4. A shirt costs a business $9.00. The retail price of each shirt is $16.50. Determine the
markup. 16.50 – 9.00 = $7.50
5. The retail price for a leather coat is $129.00. The markup is $45.00. Determine the
cost. 129.00 – 45.00 = $84.00
6. The retail price for a pair of skis is $280.00. The markup is $125.00. Determine the
cost. 280.00 – 125.00 = $155.00
7. Determine the retail price on each of the following items. Record your answers in
the spaces provided.
Cost
Initial Markup
Retail Price
$ 22.60
$ 11.99
$34.59
17.50
8.00
25.50
0.89
0.17
1.06
150.00
75.00
225.00
115.00
15.00
130.00
78.00
22.00
100.00
8. The cost of a DVD player is $20.00. The DVD player has a markup of 29.50.
Determine the retail price. 20.00 + 29.50 = $49.50
9. Determine the markup on each of the following items. Record your answers in the
spaces provided.
Retail Price
Cost
Markup
$ 22.50
$ 14.00
$ 8.50
2.00
1.15
.85
8.65
5.00
3.65
225.00
150.00
75.00
14.95
10.74
4.21
10. The cost of a suit is $89.65. The retail price for the suit is $159.00. Determine the
markup. 159.00 – 89.65 = 69.35
11. Determine the cost of each of the following items. Record your answers in the
spaces provided.
Retail Price
Markup
Cost
$ 23.00
$ 9.20
$ 13.80
1.06
0.27
.79
225.00
75.00
150.00
99.95
45.00
54.95
7.25
2.00
5.25
12. The retail price of the iPad2 with Wi-Fi and 32GB is $599.99. The initial markup is
$399.99. Determine the cost. 599.99 – 399.99 = $200.00
Retail Method of Marking up Merchandise
Some businesses markup all merchandise a given percentage. For example, a small sporting
goods store may decide to mark up all merchandise 50 %; a larger chain store may mark up all
items in the health and beauty aids department 40%, all items in the clothing section 50%, etc.
In this method, the markup is expressed as a percentage of the unknown retail price. Expressed
as a formula:
Retail Price = Cost/100%-Markup%
Example: If the cost of a stereo is $110.00 and the markup percentage desired is 40%, the retail
method would be determined as follows:
Retail Price = $110.00/100%-40%
Retail Price = $110/.60
Retail Price = $183.33
Practice:
Item
Gloves
Shirt
Shoes
Suit
Lamp
Ski Jacket
Table
Cost
$ 6.50
9.00
19.00
99.00
47.95
70.00
62.00
Markup on Retail
40%
50%
35%
66%
28.5%
40%
50%
Retail Price
$ 10.83
18.00
29.23
291.12
86.71
116.67
124.00
Markup Percentage
Markup can be expressed as a percentage of the cost or as a percentage of the retail price.
 Markup as a percentage of cost is found by dividing the initial markup by the cost.
Markup Percentage based on cost = Markup/Cost
Example: If a pair of shoes costs $12.00 and has a mark of $8.00, the markup
percentage of cost would be 67%.
$8.00/$12.00 = 67%

Markup as a percentage of retail price is found by dividing the markup by the retail
price.
Markup Percentage based on retail price = Markup/Retail price
Example: If a pair of shoes costs $12.00 and has a markup of $8.00, the retail price must
first be determined (C + MU = RP) the retail price is $20.00.
$ 8.00/ $20.00 = 40%

Go over changing decimals to percentages
Examples: .07 = 7%
.15 = 15%
1.30 = 130%
Markup Percentage Practice (1 & 2 together)
1. The cost of a comforter set is $120.00. The markup is $65.00. Determine the markup
percentage based on cost. 65.00/120.00 = 54%
2. The cost of a comforter set is $120.00. The markup is $65.00. Determine the retail price
and the markup percentage based on retail price. $120.00 + $65.00 = $185.00
185.00/65.00 = 35%
3. Determine the markup as a percentage of cost for the following items. Record your
answers in the spaces provided below. Round your answers to the nearest tenth of one
percent. (i.e. .6874 = 69%, 1. 01 = 101%)
Cost
Markup
$ 7.20
175.00
0.78
1.65
25.00
1.00
Markup % of Cost
$ 4.80
87.50
0.31
0.55
25.00
1.39
67%
50%
40%
33%
100%
139%
4. The cost of a motorcycle is $650.00. The markup is $312.00. Determine the markup
percentage based on cost. 312.00/650.00 = 48%
5. Determine the initial markup as a percentage of retail price for the following items.
Record your answers in the spaces provided. Round your answers to the nearest tenth
of one percent.
Retail Price
Markup
Markup % of Retail Price
$ 10.00
$ 2.50
25%
225.00
75.00
33%
1.10
0.33
30%
2.20
0.55
25%
50.00
20.00
40%
124.00
54.00
44%
6. The retail price of a motorcycle is $ 900.00. The markup is $270.00. Determine the
markup percentage based on retail price. 270.00/900.00 = 30%
7. For each of the following problems, calculate (a) dollar markup, (b) the markup% based
on retail, and (c) the markup% based on cost.
Retail Price
Cost
Answer a,b & c
$2.50
$ .75
a) $ 1.75
b) 70%
c) 233%
$7.00
$5.50
a) $1.50
b) 21%
c) 27%
$34.00
$26.00
a) $8.00
b) 24%
c) 31%
$199.23
$159.00
a) $49.23
b) 25%
c) 33%
$10.00
$5.00
a) $5.00
b) 50%
c)100%
8. Determine the Retail Price and Cost of four of your favorite items. Use the internet to
find Retail Price and Cost (Google “cost to make a_______”). Once you have located
these prices complete a,b,and c, as you did in number 7 above.
Product
Nissan Altima
Retail Price
$21,000
Cost
$9,500.00
$7.00
$5.50
$34.00
$26.00
$199.23
$159.00
$10.00
$5.00
Answer a,b & c
a) $11,500.00
b) 55%
c) 121%
a)
b)
c)
a)
b)
c)
a)
b)
c)
a)
b)
c)