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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 $= x\% = (x / 100) = .x$
example: $15\% = (15 / 100) = .15$
(Original * Markup) + Original = Total

Using the distributive property of elementary algebra:
Original * (Markup + 1) = Total

Solved for Markup:
(Total / Original) âˆ’ 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%