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Business Math - (Markup & Markdown) (Revised)

The document discusses factors to consider when setting prices, such as ensuring prices are not too high or low, and how to calculate markup and markdown rates. It provides examples of computing markup based on cost and selling price, and defines additional markup, markup cancellation, and markdown rates. The homework involves practicing calculations of markup and markdown rates.

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0% found this document useful (0 votes)
63 views42 pages

Business Math - (Markup & Markdown) (Revised)

The document discusses factors to consider when setting prices, such as ensuring prices are not too high or low, and how to calculate markup and markdown rates. It provides examples of computing markup based on cost and selling price, and defines additional markup, markup cancellation, and markdown rates. The homework involves practicing calculations of markup and markdown rates.

Uploaded by

Kievs Gts
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
You are on page 1/ 42

PRICING

ANNA PATRICIA F. MALTO, CPA


[email protected]
AGENDA
Understand the primary factors considered
in setting the right price of a product
Learn how to compute for markup and
markdown
Size: Grande
Source: Zomato (O Square, Starbucks Greenhills, San Juan City)
McShare Bundle for 3
6-pc Chicken McDo, 3 rice, 1 BFF fries, 3 regular drinks
Source: Zomato (Ortigas Avenue Corner Madison Street, Greenhills, San Juan City)
Tide with Freshness of Downy Perfume Fantasy (5kg)
Source: Iprice (https://iprice.ph/tide/housekeeping/garment-care/washing/detergents/)
Zara embroidered dress with vent
Source: Zara Website (https://www.zara.com/ph/en/embroidered-dress-with-vent-
p05598035.html?v1=9831767&v2=1295817)
Apple Watch Nike+Silver Aluminum Case with Pure Platinum/Black
Nike Sport Band (40mm)
Source: Apple Website (https://www.apple.com/ph/shop/buy-watch/apple-watch/aluminum-silver-pure-
platinum-black-sport-band?preSelect=false&product=MU6H2PP/A&step=detail#)
Casio FX-991MS
Source: Iprice (https://iprice.ph/compare/casio-fx-991ms/)
ACI Company
Income Statement
For the year ended December 31, 2018

Net Sales PhP 1,000,000


Less: Cost of Sales 700,000
Gross Profit 300,000
Less: Operating Expenses
Selling PhP 50,000
Administrative 25,000 75,000
Net Income 225,000
Gross Sales PhP 1,200,000
Sales Discounts, Returns,
and Allowances (200,000)
Net Sales PhP 1,000,000
Gross Sales PhP 1,200,000

(Selling Price x Number of Products Sold)


PhP 120 x 10,000 units sold
SETTING THE RIGHT PRICE
If the price is too high – Customers might not
be able to afford the product
If the price is too low – Company might not be
able to make a profit
Pricing 1 Pricing 2 Pricing 3
Selling
Price

Product Cost Markup


BY DEFINITION
SELLING PRICE – price at which a product is
sold to the customers
PRODUCT COST – purchase price of the product
MARKUP – amount added to the product cost to
arrive at the original selling price
Pricing 1 Pricing 2 Pricing 3
Selling
Price

Product Cost Markup


PRODUCT COST + MARKUP =
SELLING PRICE
PhP 70+ MARKUP = PhP 120
How much is the markup?
PRODUCT COST + MARKUP = SELLING PRICE
PhP 70+ MARKUP = PhP 120
Based on Based on
Selling Price Cost

Product Cost PhP 70 58.33% 100%


Markup PhP 50 41.67% 71.43%
Selling Price PhP 120 100% 171.43%
Based on
Selling Price

Product Cost ??? 58.33%


Markup ??? 41.67%
Selling Price PhP 120 100%
Based on
Selling Price

Product Cost PhP 70 ???


Markup PhP 50 ???
Selling Price PhP 120 100%
Based on
Selling Price

Product Cost PhP 70 58.33%


Markup PhP 50 41.67%
Selling Price ??? ???
Based on
Cost

Product Cost ??? 100%


Markup ??? 71.43%
Selling Price PhP 120 171.43%
Based on
Cost

Product Cost PhP 70 100%


Markup PhP 50 ???
Selling Price PhP 120 ???
Based on
Cost

Product Cost ??? ???


Markup PhP 50 71.43%
Selling Price PhP 120 171.43%
PRODUCT COST + MARKUP = SELLING PRICE
Based on Based on
Selling Price Cost

Product Cost PhP 80 (a) (d)


Markup PhP 20 (b) (e)
Selling Price PhP 100 (c) (f)
HOMEWORK
Prepare for a graded seatwork next meeting.
SEATWORK
Markup on Cost Markup on
Selling Price Cost Markup % Selling Price %
PhP 480 (a) PhP 120 (b) (c)
(d) PhP 300 PhP 120 (e) (f)
(g) PhP 400 (h) 30% (i)
PhP 500 (j) (k) (l) 30%
(m) PhP 500 PhP 100 (o) (p)
Pricing 1 Pricing 2 Pricing 3
Selling
Price

Product Cost Markup


PRODUCT COST + MARKUP = SELLING PRICE
PhP 70+ MARKUP = PhP 120
Based on Based on
Selling Price Cost

Product Cost PhP 70 58.33% 100%


Markup PhP 50 41.67% 71.43%
Selling Price PhP 120 100% 171.43%
PRODUCT COST + MARKUP = SELLING PRICE

Based on Based on
Selling Price Cost

Product Cost ??? 58.33% 100%


Markup ??? 41.67% 71.43%
Selling Price ??? 100% 171.43%
PRODUCT COST + MARKUP = SELLING PRICE

Based on Based on
Selling Price Cost

Product Cost Not given 58.33% ???


Markup Not given 41.67% ???
Selling Price Not given 100% ???
PRODUCT COST + MARKUP = SELLING PRICE

Based on Based on
Selling Price Cost

Product Cost Not given ??? 100%


Markup Not given ??? 71.43%
Selling Price Not given ??? 171.43%
Convert MU%sp to MU%cost and vice versa.

MU%sp MU%cost
MU%cost MU%sp
Cost%sp SP%cost
EXERCISE
Markup Rate Markup Rate
(Cost) (Selling Price)
12% (a)
(b) 36%
125% (c)
NEW Selling
Price

ORIGINAL
Selling Price

Product Cost Markup Additional Markup


BY DEFINITION
ADDITIONAL MARKUP– amount added to the
original selling price to arrive at a new selling price
MARKUP CANCELLATION– reduction in the new
selling price that does not decrease the price below
the original selling price
MARKDOWN – reduction in the original selling price
MARKDOWN [RATE]
Original Selling Price P 120.00
New Reduced Selling Price P 100.00
Markdown P 20.00
Markdown Rate
Markdown
Original Selling Price
16.67%
EXERCISE
Original New Selling
Markdown Markdown Rate
Selling Price Price
PhP 320 PhP 280 (a) (b)
(c) PhP 300 (d) (e)
(f) PhP 800 PhP 320 (g)
HOMEWORK
 Prepare for a graded seatwork next meeting.
 What are sales discounts, returns, and
allowances?
SEATWORK
Markup Rate
Markup Rate (Cost)
(Selling Price)
25% (a)
(b) 52%
SEATWORK
From the original selling price of P 200, Company A
decides to increase the selling price to P 250 (new
selling price).

On the day of Christmas Eve, Company A held a


sale reducing the price from P 250 to P125.
SEATWORK
Reduced
Original Markdown
Selling Markdown
Selling Price Rate
Price
PhP 450 PhP 380 (f) (g)
(h) PhP 600 PhP 180 (i)

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