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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) − 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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