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Module 4 Mark On Mark Down and Mark Up

This document defines and provides examples for understanding mark-on, mark-up, and mark-down pricing strategies. It begins by defining key terms like cost, selling price, profit, mark-up, and explains how they relate through basic equations. It then provides 9 examples calculating mark-ups, mark-ons, costs and selling prices in various scenarios. It concludes by defining mark-down, explaining how and why businesses use markdowns, and providing 2 examples calculating mark-down amounts and rates based on given selling prices and sale prices. The overall document serves to help the reader understand and apply the concepts of mark-on, mark-up, and mark-down through both conceptual definitions and practical worked examples.

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Stacey Villanueva
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997 views

Module 4 Mark On Mark Down and Mark Up

This document defines and provides examples for understanding mark-on, mark-up, and mark-down pricing strategies. It begins by defining key terms like cost, selling price, profit, mark-up, and explains how they relate through basic equations. It then provides 9 examples calculating mark-ups, mark-ons, costs and selling prices in various scenarios. It concludes by defining mark-down, explaining how and why businesses use markdowns, and providing 2 examples calculating mark-down amounts and rates based on given selling prices and sale prices. The overall document serves to help the reader understand and apply the concepts of mark-on, mark-up, and mark-down through both conceptual definitions and practical worked examples.

Uploaded by

Stacey Villanueva
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 46

MARK-ON, MARK-UP

AND
MARK DOWN
After going through this lesson, you are expected to:

1.Define and differentiate mark-on, mark-up, and mark-


down;
2.solve problems related to mark-on, mark-up and
markdown; and
3.obtain the selling price after mark-on, mark-up or
markdown.
4.value the importance of mark-on, mark-up and mark-
down in real life situation
Cost is the price that a company or store has to pay for
the goods it is going to sell, it is the price that has to be
spent to produce goods or services before any profit is
added.
If a trader bought a product for P 100, this is the cost
of the product as far as the trader is concerned
Operating cost is the price (per unit) incurred relative to
the production and sale of a commodity.
 

Selling price is the price at which the commodity is sold


per unit.
S = C + E + P

Where S = Selling price


C = Cost price
E = Operating Expenses
P = Profit
Profit is the money earned after the set price and the
operating costs are accounted for after the sale of a
commodity.
Mark up is the difference between the selling price
and the cost price sometimes referred to as margin or
gross profit.

MU = S - C

Where MU = Mark-up
S = Selling price
C = Cost Price
Example 1. Aling Vienna would like to sell little trinkets she
purchased from divisoria for P12 each. If the operating cost
is set at 25% of the cost and she would like to have a 15%
profit on the cost of each item,
a. Determine the mark-up price for each trinket
b. Help Aling Vienna determine the selling price for
each trinket.
Solution:
a. MU = E + P Since MU = S-C and
= 0.25 x 12 + 0.15 x 12 S = C + E + P, it
follows that
= 3 + 1.80 MU = E + P
= P 4.80  

The mark-up price for each trinket is P 4.80


b. S = C + MU
= P 12 + P 4.80 Since MU = S-C and
by algebraic
= P16.80 manipulation, it
follows that
S = C + MU
 
 
Example 2. A Jacket which costs P 1,350 is being
sold at P 2,025. What is the rate of mark-up based on
cost?
Example 3. Joy buys a notebook with a cost of P45.
The rate of mark-up based on cost is 25%. Find the
selling price and the mark-up.
Solution:
MU = 0.25 x P45
= P 11.25
 
S = P 45 +P 11.25
= P 56.25
The selling price of Joy’s notebook is P 56.25 which
includes a mark-up of P 11.25.
Example 4. Kim decides to impose a mark-up of P 5 on each
pen he sells to his classmates and friends. This represents
a 20% mark-up based on the selling price. Find the cost and
the selling price of the pens Kim sells.

Solution:
MU = 0.20 x S
5 = 0.20 x S
S = 5/0.2
= P 25
The selling price of each pen Kim sells is P 25.00
C = S - MU
= P 25 – P 5 = P 20.00

Kim’s pens had a cost price of P 20.00


Example 5. Find the cost and mark-up of a box of pencils
being sold for P 135 with a 25% mark-up based on selling
price.

Solution:
MU = 0.25 x S
= 0.25 x P 135
= P 33.75
 
C = S - MU
= P 135 - P 33.75
= P 101.25

The cost of the box of pencils is P 101.25


and the mark-up is P 33.75
When the price of a retail product increases fairly
soon after another increase is called Mark-on.

MO = PS – S

Where MO = Mark-on
PS = Peak Selling Price
S = Regular Selling Price
 
Why a mark-on becomes an option for a
business owner?

• a calamity has hit the source of a raw material or


commodity therefore affecting its supply

• seasonal demands (Christmas items, Valentines, etc.)

• special occasion is being celebrated (commemorative,


death anniversary, etc.)
Example 6. Manang Crising observes that market goers
prefer to buy fish from her because there is an under
supply of meat in the market. She then decides to increase
the price of galunggong by P 10 per kilo. If the cost of
galunggong is P 90 per kilo with a 35% mark-up, what is its
new selling price with the additional increase of P10? By
how much is the rate of mark-up based on cost increased
by adding P10 to the regular selling price of the
galunggong?
Solution:
MU = 0.35 x S
= 0.35 x P 90
= P 31.50

Selling price before increase:


S = C + MU
= P 90 + P 31.50
= P 121.50
 
Selling Price after increase:
PS = S + MO
= 121.50 + 10
= P 131.50

Combined Rate of Mark-up and Mark-on


= 31.50+10
90
= 0.4611 The mark-up is increased by
= 46.11% 11.11% by the additional mark-on
46.11 – 35 of PhP10 imposed by Manang
= 11.11% Crising
Example 7. Ivy’s Flower Shop imposes a 45% mark-
up on flowers delivered to them for sale. During
Valentines Day, however, an additional mark-on of
25% of the regular selling price is added on.
Determine the unit price of 300 roses worth
PhP15,000 delivered to Ivy’s Flower Shop during
Valentine’s Day. How much is the selling price of
each rose during All Valentine’s Day at this flower
shop?
Solution:
Unit Price = 15,000
300

= P 50

MU = 0.45 x C
= 0.45 x 50

MU = P 22.50
S = C + MU
= 50 + 22.50
= P 72.50

MO =0.25 S
= 0.25(72.50)
=18.125
=P18.13
Example 8. Find the regular selling price and the cost
price of memorabilia items being sold for PhP 500 if the
mark-up is set at a rate of 25% of the cost price with an
approved 15% mark-on rate based on the cost price
included because of a special event.
Solution:

PS = C + MU + MO
500 = C + 0.25C + 0.15C
500 = 1+ O.25C +0.15C
500 = 1.40C
C = P 357.14

The cost price of the memorabilia item is P 357.14.


MU = 0.25xC
= 0.25x357.14
= PhP89.29

S = C + MU
= 357.14 + 89.29
= P 446.43

The regular selling price of the memorabilia


item is P 446.43
Example 9
David’s bookstore foresees that people will buy notebook
several days before the start of the new school year. The cost of
the notebook in the store is Php 25. Two weeks before the start
of the new school year, the store’s rate of mark-up based on
selling price is 8%. One week after the opening class, they
decided to put additional mark-on of 2% to its selling price.

a. What is the selling price?


b. What is the mark-up?
c. What is the additional mark-on?
d. How much is the new selling price after additional mark-on
a. MU = MUs% x S
MU = 0.08 S

S = C + MU
S = 25 + 0.08 S
S - 0.08S = 25
1 – 0.08S = 25
0.92 S = 25
0.92 S = 25
0.92 0.92

S = 27.17
b. MU = 0.08 X S
= 0.08 X 27.17
= 2.17

c. MO = Mos% X S
= 0.02 X 27.17
= 0.54
d. PS = S + MO
= 27.17 + 0.54
PS = 27.71
PS = S + MO
= 72.50 + 18.13
= P 90.63

Each rose sells for P 90.63 at Ivy’s Flower


Shop during Valentine’s Day.
Mark-down is the difference between the regular selling
price and sale price

MD = S – SP

Where MD= Mark-down


S = Selling price
SP = Sale Price
 
Mark-downs commonly happen when the mall decides to
sell their items at cut down prices to clear their warehouse
collection.

For instance, some items which usually sold for PhP150


are sold at 50% off during mall sales and so the mark-down
price is set at PhP75.
Reasons why a mark-down is sometimes thought of as an
option for a business owner.

They may cite the following:

• the item is a perishable item and it is best to dispose of it


sooner than simply throw it away
• the item has become dirty or worn out, or possibly out
of style

• competition forces the marking down of an item.


Remember that rates of mark-downs are always computed
based on the selling price.

Note that it is possible that instead of making the business


owner earn a positive profit, selling an item on sale sometimes
gives rise to a negative profit. In this case, the profit is said to
be a LOSS.
When an item is given a selling price where the profit ends
up being zero, this is said to be the BREAK-EVEN PRICE.
In this case, the selling price is simply equal to the total of the
cost price and the operating expenses:
Break-Even Price = Cost Price + Operating
Cost

BEP = C + E

where BEP = Break-Even Price


C = Cost Price
E = Operating Expenses
Example 10
Carlo was able to buy a pair of shoes regularly priced at
PhP3,500 for only PhP2,100.
a. What was the amount of the mark-down?
b. What was the rate of the mark-down?
Solution: MD = S - SP
= 3,500 – 2,100
= Php 1,400

MD% = MD x 100%
S
= 1,400 x 100%
3,500
= 40%
The amount of the mark-down is Php 1,400 which is
equivalent to a 40% mark-down
Example 11
During a Midnight Madness Sale, a board game regularly
priced at PhP8,500 was sold at 55% discount. The cost of the
board game is PhP3,450 and expenses are 14% of the
regular selling price.

a. What was the sales price

b. What was the profit or loss


Solution:

a. 100% - 55% = 45% (The sale price is 45% of the


selling price.)

SP = 0.45 x S
= 0.45 x 8,500
= Php 3,825

The sale price of the board game is Php 3,825


b. CTOTAL = C+E
= 3,450 + 0.14 x 8,500
= Php 4,640

P = SP - CTOTAL
= 3,825 – 4,640
= - Php 815 (loss)

The loss made on the sale was Php 815


Example 12
Super Mall paid PhP15,000 for a set of dishes. Expenses are
18% of the selling price while the required profit is 15% of the
selling price. During an inventory sale, the set of dishes was
marked down by 30%.
a. What was the regular selling price?

b. What was the sale price?

c. What was the profit or loss?


Solution:
a. S=C+E+P
S = C + 0.18xS + 0.15xS
S - 0.18xS - 0.15xS = 15,000
1-0.18xS-0.15xS = 15, 000
0.67xS = 15,000
S = 15,000
0.67

= Php 22,388.06

The regular selling price of the set of dishes is Php 22,388.06


b. 100% - 30% = 70% (The sale price is 70% of the selling
price.)
SP = 0.70 x S
= 0.70 x 22,388.06
= Php 15,671.64

The sale price of the set of dishes was Php 15,671.64.


c. CTOTAL = C+E
= 15,000 + 0.18 x 22,388.06
= Php 19,029.85

P = SP - CTOTAL
= 15,671.64 - 19,029.85
= -Php 3,358.21 (Loss)

The Super Mall incurred a loss of Php 3,358.21 in the


sale of the set of dishes

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