Presentation on theme: "Making Sense of Markups"— Presentation transcript:
1 Making Sense of Markups Beginning of Lesson of Mark ups. Think in a business owner mindset. How do business owners make a profit?Everything cost money! In a business, an owner want to be sure to make a profit to a successful business.
2 Pricing Products Does a retailer make the products it sells? Not Usually –buy from wholesalers/producersDoes a Retailer buy a shirt for $15 and sell it to customers for $15?Why or Why not?If a retailer does not sell its products for more than what it cost them, what would happen?Begin a discussion with students about business mind markups.Can you name any products that you believe businesses markup to rip you off?The next 5 slides talk about America’s biggest rip offs according to a CNN report.
3 Rounding in Marketing Round money to the nearest 100th $$435.35Round Percentages to nearest tenth97.567%97.6%
4 Pricing ProductsTo make a profit, what must a business do with the products they buy to sell?Mark them up
5 What is Mark-upCost: the initial price paid by retailers/manufacturers for the products they sellIncludes shipping costsMarkup: adding a dollar amount (markup), as a percentage or a dollar amount, to the cost of the products purchased to sell to customersUsed by retailers and wholesalers primarilyRetail Price: The total price charged for a product sold to a customer, which includes the manufacturer's cost plus a retail markup.
6 Convert % to a Decimal Answer 8.5% = 0.085 Example: convert 180% Process: Drop the % symbol and move the decimal point 2 places to the leftExample: Convert 75% to a decimal:Example: Convert 8.5% to decimalAnswer 8.5% = 0.085Example: convert 180%Answer 180% = 1.80
7 How to MarkupMost difficult thing to determine in business is how to price your productShould every product a business sells be “marked-up” the same percentage?”No, every item is different and is based on:Customer Demand for a productWhat competitors are pricing their products for
8 Calculating Markup Amount Formula: Markup = Retail Price – CostDifference between retail price and costThe markup may also be called the gross profit or profit margin
9 ExampleDiscount Electronics purchased HDTVs for $ each and sells them for $899.99What is the markup amount on each TV?Markup = Retail Price – CostMark up = – =410.43Markup = Retail Price – CostMark up = –Markup =
10 Calculate Retail Price w/Markup Rate First calculate the markup amountThen add the markup amount to the cost to equal your Retail PriceTwo Step Formula:Markup = Cost * Markup RateRetail Price = Cost + Markup
11 ExampleWholesale Jewelers, Inc. sells digital watches to jewelry stores for $ each. The suggested retail price is to add a mark-up rate of 160% of cost. What is the suggested retail price?Markup = * =Retail Price = =29.52Read problem. Allow students time to calculate the answer. If you wish you can show your work on the board. The slide will display the answer.Markup = Cost * Markup RateMarkup = * 1.6Markup = 29.52Retail Price = Cost + MarkupRetail Price =Retail Price = $47.9747.97Formula:Markup = Cost * Markup RateRetail Price = Cost + Markup
12 Let’s Practice What is 170% of $125 cost 104% of $4329 cost is what? MarkupRetail Price:104% of $4329 cost is what?Markup:What is 170% of 125MarkupRetail Price: 125 * 1.70 = $212.50104% of 4329 is what?4329 * 1.04 =What % of 225 is 500?X * 225 = 500X = 2.22 = 222%125% of what number is 325?1.25 * x = 325X = 260
13 Calculate Additional Quantity You want to purchase more product than last year.Formula:Additional Quantity = Original order * converted %Total Order = Additional Quantity + Original orderExample:You bought 95 hats last year and want to increase your order by 50% more this year.95 X .50 = 47.50= round up/downHow many are you buying?143 itemsWhat is 170% of 125MarkupRetail Price: 125 * 1.70 = $212.50104% of 4329 is what?4329 * 1.04 =What % of 225 is 500?X * 225 = 500X = 2.22 = 222%125% of what number is 325?1.25 * x = 325X = 260
14 ExampleIf our school store purchased 144 mittens last year, and this year we would like to purchase 30% more than last year. How many mittens do we need to order this year?144 * .30 = 43.2= 187 mittens
15 Markup as a Rate (Percentage) The markup rate is the markup expressed as a percentBusinesses usually express the markup in one of two ways:As a percent of the Retail priceAs a percent of Cost
16 Markup as a Percent of Retail Price Businesses usually express the markup as a percent of the retail price (selling price)Formula: Markup rate = Markup / Retail PriceExample: Luggage costs $54 and you want to sell it for $90, what is the markup rate based on retail price?Markup Amount = Retail Price – Cost$90-$54 = $36 markupMarkup rate = Markup / Retail Price36/90 = .40 or 40% markup Rate
17 Markup as a Percent of Retail Price A Florist buys roses for $10.99 a dozen and sells them for $24.95 a dozen. What is the markup rate based on the retail or selling price?Markup = Retail Price – CostMarkup Amount ==Markup rate = Markup / Retail PriceMarkup rate = 13.96/24.95Markup rate = .5596Markup rate = 56%Click 1 will display the example. Clicks 2 and 3 will display the formulas. Clicks 5 and 6 will display the answers.Markup = Retail Price – CostMarkup =Markup = 13.96Markup rate = Markup / Retail PriceMarkup rate = 13.96/24.95Markup rate = .5596Markup rate = 56%
18 Markup as a Percent of Retail Price Our school store purchases a printed Under Armour hooded sweatshirt from Gear for Sports for $ We sell the hooded sweatshirt for $ What is the markup rate based on retail price?Markup rate = Markup / Retail Price$60.00 – $37.50 = $22.50 markup$22.50 / $60.00 = .375 = 37.5%Again read example on Powerpoint. Give time for students to calculate answers before the correct answer is given.
19 Markup as a Percent of Cost Many businesses use the cost to figure the markup rateFormula: Markup rate = Markup / CostExample: Rain suit cost $120 and you want to sell it for $162. What is the markup based on cost?First calculate markup: $162- $120 = 42Next calculate markup rate: 42/120 = 35%
20 PracticeGear for Sports sells under armour t-shirts to the school store for $13.50 each. They have a suggested retail price computed by marking up the cost by 60%. What is the suggested retail price?Markup = Cost * Markup Rate13.50 * .60 = 8.10Selling Price = Cost + MarkupSelling Price = = $21.60Read Problem. Allow students time to calculate their answer. Click two more times to show the formulas they use. Then the next two click will show the answers.Markup = Cost * Markup Rate13.50 * .60 = 8.10Selling Price = Cost + MarkupSelling Price = = $21.60