MarkupMarkup

How much do products really cost?!

The difference between the cost of a good or service and its selling price.

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 upDefinition of Mark up

Markup = Sale price – CostMarkup percentage = (markup / price *

100)Thus, assume that the CD cost $1.00 to

produce and was sold for $20.00. What is the mark up?

• Mark up = $20.00 - $1.00

• Mark up = $19.00

Price DeterminationPrice Determination

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

Markup as a %Markup as a %

Example: Cost of PensExample: Cost of PensPen ManufacturerPen Manufacturer

Ink: $3.00Ink: $3.00Spring: $1.00Spring: $1.00Case: $5.00Case: $5.00Dip: $1.00Dip: $1.00

Cost Cost $10.00 $10.00

Cost: $10.00Cost: $10.0050% Markup =50% Markup =

$5.00$5.00Selling Price = Selling Price =

$15.00$15.00

Middle ManMiddle ManCost: $15.00Cost: $15.00

Shipping: $5.00Shipping: $5.00Storage: $5.00Storage: $5.00

Distributor: $5.00Distributor: $5.00

Cost: $30.00Cost: $30.0030% Markup =30% Markup =

$9.00$9.00Selling Price = Selling Price =

$39.00$39.00

What was the original cost? $10.00Selling Cost?$49.50Mark up??= $39.50

ContinuedContinued

Pen StorePen StoreCost: $39.00Cost: $39.00

Shipping: $3.00Shipping: $3.00Storage: $3.00Storage: $3.00

Cost: $45.00Cost: $45.0010% Markup =10% Markup =

$4.5$4.5Selling Price = Selling Price =

$49.50$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 Top Ten Highest Marked Up Products?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 QuizSurprise Quiz