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Master 33-2, Reproducible
Chapter 33
Markup and Markdown
Student Name _______________________________ Date __________________ Period _______________
Markup and markdown are terms commonly used in the retail market when pricing is
discussed. Markup is the dollar amount that a retailer adds to the cost of a product to determine its
selling price. Markup can be figured in terms of dollars or percents. Markup pricing is the pricing of
retail goods by adding a set markup to the cost.
Some retailers choose a dollar amount for their markups, and add that dollar amount to
the price they paid to obtain the good. For example, an item costs the retailer $4. One dollar
will be added for a selling price of $5. In this case, the markup is $1.
More often, the markup is stated as a percent of the cost or as a percent of the selling
price. Because markup can be figured either on cost to the retailer or on selling price, there
can be confusion. When you give markup as a percent, be sure to indicate whether it is based
on cost or selling price.
In the example given, markup based on cost would be figured as follows:
Markup (based on cost) = Amount of Markup/Cost
= $1/$4 = 0.25 = 25%
Markup based on selling price would be figured as follows:
Markup (based on selling price) = Amount of Markup/Selling Price
= $1/$5 = 0.20 = 20%
Notice that the markup based on cost is 25%, whereas the markup based on selling price is
only 20%. The final selling price is the same. It is just the way the percent markup is figured that is
different.
In many industries, the percent markup is standardized. For example, hardware is usually
marked up 35% of cost. Greeting cards are usually marked up 100% of cost. If you know the cost of
the product and the markup percent based on cost, you can figure the selling price.
Markup in Dollars = Percent Markup based on Cost × Cost
Selling Price
= Cost + Markup in Dollars
Selling Price
= Cost + (Percent Markup × Cost)
= $4 + (25% × $4)
= $4 + (0.25 × $4)
= $4 + ($1) = $5
Permission granted to reproduce for educational use only
(Continued)
Copyright by Goodheart-Willcox Co., Inc.
CH_33.indd 464
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Master 33-2, Reproducible (continued)
Chapter 33
465
Student Name _______________________________
Complete the following table by calculating the markup based on cost and the selling price. In setting
prices, any amounts beyond the hundredths place are rounded up.
Item
Calculating Markup and Selling Price, Based on Cost
Markup Based Dollar Amount
Cost to Retailer
Selling Price
on Cost (%)
of Markup
What goes up must sometimes come down. In retail, sometimes customers do not buy products
because they perceive the price as too high or they do not like the product. When this happens,
retailers rely on the law of demand. When the price falls, demand goes up, and more of the product
will sell. So the retailers reduce the prices. This reduction is called a markdown. A markdown
is the same as a discount. A markdown is the actual dollar amount subtracted from the selling
price; however, markdowns are figured as a percent of the selling price. You will see markdowns
advertised when there are sales. Signs will say, “20% off!”
Complete the following table by calculating the markdown based on selling price and the new selling
price. In setting prices, any amounts beyond the hundredths place are rounded up.
Calculating Markdown and Reduced Selling Price, Based on Selling Price
Dollar Amount
Reduced
Item
Selling Price
Markdown (%)
of Markdown
Selling Price
Permission granted to reproduce for educational use only
Copyright by Goodheart-Willcox Co., Inc.
CH_33.indd 465
7/17/2009 3:40:39 PM