Markup and Markdown: Study Sheet of Markup and Markdown

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Description: Explore the basics of markup and markdown with this Smartacus Study Sheet. Use it to study definitions and formulas (including cost markup, price markup, calculating markdown, and pricing perishables). It also prints for easy reference.

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Accounting Terms
Markup from Cost
Markup from Price
Pricing Perishables
Markdowns
Accounting Homework Help: Related Links

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.

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)

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2 Presentation Comments

i need to find an easy way to remember the different formulas for markup and markdown on cos and selling price

heather williams on Monday, 07 April 2008, 19:00 CDT |
Heather, if you look at the formulas for Markup from Cost you'll notice that they all have the same three variables -- price, cost, and markuprate. It's the same formula each time, only it's solved for a different one of the three variables. That means if you understand how to take the first formula and change it into the other two, then you only need to remember the first one.
The same is true for Markup from Price and Markdowns.

Rudy on Friday, 11 April 2008, 20:55 CDT |