1. Pricing Math

2. Lesson Objectives Use the basic formula for calculating a retail price Calculate dollar and percentage markup based on cost Calculate discounted price

3. John has a computer business and bought a line of computers for $200 each. He sells them for $350. He’s happy because he has made a profit of $150 per computer. Is John correct?

4. Markup versus Profit Profit – Amount left over from revenue (sales) after costs of merchandise and business expenses are paid Markup or margin – AKA net sales – Difference between sales revenue and cost of goods sold – Expenses and taxes have not yet been paid

5. Markup and Gross Profit Gross Sales (Revenue)$350.00 Cost of goods sold (Cost of computer) 200.00 Net Sales (Markup or margin) 150.00 Less expenses 125.00 Profit $ 25.00

6. Markup and Gross Profit Gross Sales (Revenue)$350.00300.00 Cost of goods sold 200.00 Net Sales (Markup or margin) 150.00 100.00 Less expenses 125.00 Profit $ 25.00 $(25.00)

7. Basic Markup Calculations Cost + Markup = Retail Price $14 + $6 = $20 Retail Price - Cost = Markup $20 - $14 = $6 Retail Price – Markup = Cost $20 - $6 = $14

8. Calculating percentage markup on cost Cost = $49.50 Retail price = $82.50 1.Calculate markup: RP – C = MU($) $82.50 – $49.50 = $33.00 2.Change MU($) to MU(%) based on cost: MU($) / C = MU(%) $33.00/$49.50 =.6667 = 66.7%

9. Determining Retail Price Based on Cost Cost = $8.50 MU(%) based on cost = 40% 1.Determine the MU($): Cost X MU(%) = MU($) $8.50 X.40 = $3.40 2.Add MU($) to cost to get retail price: Cost + MU($) = RP $8.50 + $3.40 = $11.90

10. RP x MD(%) = MD($) RP – MD($) = Discounted or sale price What is the difference in a discounted price and a sale price? ANSWER: A sale price is usually temporary Discounting Retail Prices

11. Retail price = $55.00 Discount = 30% What is the discounted price? $55.00 X.30 = $16.50 $55.00 - $16.50 = $38.50

12. Pricing Math