Study Sheet of Markup and Markdown

Posted by Professor Cram in Markup and Markdown

Accounting Terms

  • Markup is the amount of money above their cost of a product or service that a business will charge for that product or service.
  • The Price of a product or service is what a business is charging after it applies a markup.
  • Markdown is the reduction in price of a product or service based on a percentage of the original price.
  • The Original Price of a product or service is what a business was charging before it decided to apply a markdown.
  • The Sale Price of a product or service is what a business is charging after it applies a markdown.

Markup from Cost

  • Also known as Cost-Plus-Markup
  • The Markup Rate is expressed as a percentage
  • Given two of Price, Cost, and MarkupRate:

    Price = Cost x (1 + MarkupRate)

    Cost = (Price)/(1 + MarkupRate)

    MarkupRate = (Price/Cost) – 1

Markup from Price

  • The markup rate is how much (i.e., what percentage) of the price is markup
  • Markup from Price gives a business a set percentage of profit across different products
  • The Markup Rate is expressed as a percentage
  • Since the Markup Rate is the percentage of the price that is markup, it can never exceed 100%
  • Given two of Price, Cost, and MarkupRate:

    Price = Cost/(1 – MarkupRate)

    Cost = Price x (1 – MarkupRate)

    MarkupRate = 1 – (Cost/Price)

Pricing Perishables

  • Assumes some portion of the product will spoil and become unsellable
  • A second round of markup that adds the cost of the unsellable product evenly to the balance of the sellable product
  • For example, if a 40-pound box of bananas yields 5 pounds of spoilage then the price on 35 pounds must be marked up to cover the cost of the spoiled 5 pounds
  • The Spoilage Rate is expressed as a percentage
  • Given two of NewPrice, OldPrice, and SpoilageRate:

    NewPrice = OldPrice/(1 – SpoilageRate)

    OldPrice = NewPrice x (1 – SpoilageRate)

    SpoilageRate = 1 – (OldPrice/NewPrice)

Markdowns

  • Businesses generally use markdowns to generate sales and/or clear inventory
  • The Markdown Rate is expressed as a percentage
  • Given two of SalePrice, OriginalPrice, and MarkdownRate:

    SalePrice = OriginalPrice x (1 – MarkdownRate)

    OriginalPrice = SalePrice/(1 – MarkdownRate)

    MarkdownRate = 1 – (SalePrice/OriginalPrice)

Share

Comments

5 Responses to “Study Sheet of Markup and Markdown”

  1. web site says:

    Normally I do not learn article on blogs, however I wish to say that this write-up very compelled me to
    try and do so! Your writing style has been surprised me. Thank you, quite great
    article.

  2. www.dailymotion.com says:

    Hello, i believe that i noticed you visited my web site so i came to go
    back the choose?.I’m attempting to to find issues to improve my web site!I suppose its good enough to make use
    of a few of your ideas!!

  3. SB Game Hacker apk says:

    What’s up, after reading this remarkable article i am as well glad to
    share my familiarity here with colleagues.

  4. Download MovieStarPlanet Hack Coins says:

    He lives in The Childish Preep School of Proud People built aat Raleigh in Stirling.

    You will notice that the TV interview offers several multiple choice answers in response to the interview questions.
    Fill it and click the button ‘patch game’ and then wait
    to your system to complete the process.

  5. Reduce Weight says:

    Hey! This is kind of offf topic but I needd some advice from an established blog.
    Is it ery difficult to set upp your owwn blog?
    I’m not very techincal but I ccan figur things out pretty quick.

    I’m thinking about creating my oown but I’m not sure where to start.
    Do you have any tips or suggestions? With thanks

Leave a Reply