Markup How much do products really cost?!.  The difference between the cost of a good or service and its selling price.costgood service  A markup is.

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Presentation transcript:

Markup How much do products really cost?!

 The difference between the cost of a good or service and its selling price.costgood service  A markup is added on to the total cost incurred by the producer of a good or service in order to create a profit  The total cost reflects the total amount of both fixed and variable expenses to produce and distribute a product  Markup can be expressed as a fixed amount or as a percentage of the total cost or selling price. Definition of Mark up

Markup = Sale price – Cost Markup percentage = (markup / price * 100) Thus, assume that the CD cost $1.00 to produce and was sold for $ What is the mark up? Mark up = $ $1.00 Mark up = $19.00 Price Determination

Sale price = 1.99 (magic pen) Cost = 1.40 What is the markup in percentage? Solution: Markup = 1.99 – 1.40 = 0.50 Markup % = ($0.50/ 1.99) * 100 = 25.1% Markup as a %

Example: Cost of Pens Pen Manufacturer Ink: $3.00 Spring: $1.00 Case: $5.00 Dip: $1.00 Cost  $10.00 Cost: $ % Markup = $5.00 $5.00 Selling Price = $15.00 Middle Man Cost: $15.00 Shipping: $5.00 Storage: $5.00 Distributor: $5.00 Cost: $ % Markup = $9.00 $9.00 Selling Price = $39.00

What was the original cost? $10.00 Selling Cost? $49.50 Mark up?? = $39.50 Continued Pen Store Cost: $39.00 Shipping: $3.00 Storage: $3.00 Cost: $ % Markup = $4.5 $4.5 Selling Price = $49.50

1. Prescription Medicine – averages 200 – 3000% 2. Movie theatre popcorn/candy – average markup: 1275% 3. Glasses frames – can reach 1000% 4. Diamonds – up to 400% (you get the idea)… 5. Brand name clothing - $665 for a pair of Gucci jeans?!!! WT…?? 6. Restaurant drinks (soda and wine) – buy a Coke? That’s 600% more than what it costs to make! 7. Mattresses and furniture – 80% markups! 8. Greeting cards – 200%!! 9. Bottled water – can be up to 4000%!! And it’s usually just tap water…. 10. Cosmetics Top Ten Highest Marked Up Products?

Students did a surprise quiz today. If you were not in class, and you have a valid reason such as being sick or field trip, then you should talk to Mr. Park on Tuesday May 20 with a document, which can prove your valid reason of the absence. If you skipped class, then you would get zero on this quiz. Surprise Quiz