Markup
Markup
Markup is a term used in marketing to indicate how much the price of a product is above the cost of producing and distributing the product. It can be expressed as a fixed amount or as a percentage. There are numerous variations of each.
Markup Calculations
For each of the markup prices, enter the following information:
Amount-- Enter the percentage markup that will be used for this markup price (or if you use a fixed addition, enter the amount to add)
Calculation-- Use the pop-up menu to select a calculation choice
Rounding-- Choose the Rounding Method to use for this price. You can round numbers to an even quantity, or trim them to "retail" pricing such as $9.95
What is Initial Markup
Initial markup is the first markup on an item from cost to retail price. Also Known As: Original Markup
What is Maintained Markup
Maintained Markup (at Retail) Based on the actual prices received for merchandise sold during a time period less merchandise cost, expressed as a percentage
Markdown
Markdown A reduction from selling price to meet the lower price of another retailer, adapt to inventory overstocking, clear out shopworn merchandise, reduce assortments of odds and ends, and increase customer traffic
As a Fixed Amount
assume:
retail list price = $1.99 and the product cost is $1.40
MARKUP = price - cost
1.99 - 1.40 = .59
assume the actual selling price was $1.60
MARKDOWN = List price - selling price
1.99 - 1.60 = .39
INITIAL MARKUP = list price - cost
1.99 - 1.40 = .59
MAINTAINED MARKUP = sale price - cost
1.60 -1.40 = .20
As a Percentage
Algebra:
Markup 
example: 
(Original * Markup) + Original = Total
Using the distributive property of elementary algebra:
Original * (Markup + 1) = Total
Solved for Markup:
(Total / Original) − 1 = Markup
Solved for Original:
Total / (Markup + 1) = Original
Markup is the decimal representation of the markup percentage.
Original is the original amount/price.
Total is the marked up amount/price.
Specific:
INITIAL MARKUP % = initial markup / sale price
.59 / 1.99 = 29%
MAINTAINED MARKUP % = maintained markup / sale price
.20 / 1.60 = 13%
MARKUP % ON COST = markup / cost
.59 / 1.40 = 42%
MARKUP % ON PRICE = markup / price
.59 / 1.99 = 29%
To convert from markup on price to markup on cost:
MARKUP ON COST = markup % on price / 1 - markup % on price
.29 / (1 - .29) = 42%
To convert from markup on cost to markup on price:
MARKUP ON PRICE = markup % on cost / 1 + markup % on cost
.42 / (1 + .42 ) = .29
PRICE = cost / 1 - markup % on price
1.40 / (1 - .29) = 1.99
COST = price / 1 + markup % on cost
1.99 / (1 + .42) = 1.40
PRICE = markup / markup % on price
.59 / .29 = 1.99
Some Customary Markup Percentages for Retail Businesses
Using the formula (price - cost) / price
- New cars 15%
- Used cars 75%
- Electrical Appliances 30%
- Clothing 50%
- Trend Clothing 59%
- Crystal Ware 60%
- Gifts and clocks 55%
- Food Retailers 45%
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