234 Chapter 8 • Markup and Markdown
calculating cost When selling Price and
Percent markuP based on cost are knoWn
To calculate cost when selling price and percent markup on cost are known, let’s use our
knowledge of solving equations from Chapter 5. Because we are dealing with the same three
variables from the last section, simply solve the equation
SP =C (100% +%MCOST)
for the
cost. Cost, the unknown, is isolated on one side of the equation by dividing both sides by
(
100%
+ Percent markup).
8-4
ExAmplE6
CalCulating
COST
American Eagle sells a blouse for
$66
. If a
50%
markup based on cost is used, what is the
cost of the blouse?
SolutionStrategy
tryitexerciSe 6
General Electric sells automatic coffeemakers to distributors for
$39
. If a
30%
markup based on
cost is used, how much did it cost to manufacture the coffee maker?
CHECK YOUR ANSWER WITH THE SOLUTIONS ON PAGE 256.
100% +50% =150%
$ %
Review exeRcises
For the following items, calculate the missing information. Round dollars to the nearest cent
and percents to the nearest tenth of a percent.
Item Cost
Amount of
Markup Selling Price
Percent Markup
Based on Cost
1. Television set $161.50 $138.45 $299.95 85.7%
Complete worked-out solutions for
Exercises 1–5 appear in Appendix B.
8
Section i
85461_ch08_hr_229-261.indd 234 9/23/15 4:47 PM
SeCtion i • Markup BaSed on CoSt 235
Item Cost
Amount of
Markup Selling Price
Percent Markup
Based on Cost
6. Hat $46.25 $50.00 $96.25 108.1%
Solve the following word problems. Round dollars to the nearest cent and percents to the
nearest tenth of a percent.
11. Alarm clocks cost the manufacturer
$56.10
per unit to produce. If a markup of
$29.80
is added
to the cost, what is the selling price per clock?
12. LooLoo Clothing Emporium sells scarves for
$19.95
. If the cost per scarf is
$12.50
, what is the
amount of the markup?
13. After a wholesaler adds a markup of
$420
to a TV, it sold for
$949
. What is the cost of the TV?
14. Amazon.com purchases flat-screen computer monitors from H.P. for
$275.59
and sells them for
$449.99
.
a. What is the amount of the markup?
b. What is the percent markup based on cost?
15. The Holiday Card Shop purchased stationery for
$2.44
per box. A
$1.75
markup is added to
the stationery.
a. What is the selling price?
b. What is the percent markup based on cost?
16. Staples adds a
$4.60
markup to calculators and sells them for
$9.95
.
a. What is the cost of the calculators?
b. What is the percent markup based on cost?
$14
C
5.35
17. a. What is the amount of markup on a skateboard from Flying Wheels Skate Shop if the cost is
$58.25
and the selling price is
$118.88
?
b. What is the percent markup based on cost?
Complete worked-out solutions for
Exercises 6–10 appear in Appendix B.
Amazon.com, Inc., operates as an
online retailer in North America and
internationally. Its product categories
toys, kids, and baby; grocery; apparel,
The stated mission of Amazon.com
is to “be Earth’s most customer-centric
company for four primary customer
sets: consumers, sellers, enterprises,
$148
million. Ten years later netsales
AP Images/Mark Lennihan
236 Chapter 8 • Markup and Markdown
18. You are the manager of The Camera Connection. Use the advertisement for your store to
answer the following questions.
a. If the PowerShooter
1800
is marked up by
$58.50
, what is the cost and what is the percent
markup based on cost?
b. If the CyberShooter
2400
has a cost of
$88.00
, what are the amount of the markup and the
percent markup based on cost?
c. Which camera is more “profitable” to the store? Why?
d. What other factors should be considered in determining profitability?
19. Crystal Auto Supply purchases water pumps from the distributor for
$35.40
each. If Crystal
adds a
120%
markup based on cost, at what retail price should the pumps be sold?
20. Broadway Carpets sells designer rugs at retail for
$875.88
. If a
50%
markup based on cost is
added, what is the cost of the designer rugs?
21. What is the cost of a computer system that sells at retail for
$850
with a
60%
markup based
oncost?
22. A real-wood filing cabinet from Office Solutions is marked up by
$97.30
to
$178.88
.
a. What is the cost?
b. What is the percent markup based on cost?
23. The Green Thumb Garden Shop purchases automatic lawn sprinklers for
$12.50
from the
manufacturer. If a
75%
markup based on cost is added, at what retail price should the sprinklers
be marked?
24. a. What is the cost of a desk lamp at Urban Accents if the selling price is
$49.95
and the
markup is
70%
based on the cost?
b. What is the amount of the markup?
SeCtion ii • Markup BaSed on Selling priCe 237
Business Decision: Keystone MaRKup
25. In department and specialty store retailing, a common markup strategy is to double the cost
of an item to arrive at the selling price. This strategy is known as keystoning the markup
and is widely used in apparel, cosmetics, fashion accessories, shoes, and other categories of
merchandise.
The reasoning for the high amount of markup is that these stores have particularly high
operating expenses. In addition, they have a continuing need to update fixtures and remodel
stores to attract customers.
You are the buyer in the women’s shoe department of the Roma Grande Department Store.
You normally keystone your markups on certain shoes and handbags. This amount of markup
allows you enough gross margin so that you can lower prices when “sales” occur and still have
a profitable department.
a. If you are looking for a line of handbags that will retail for
$120
, what is the most you can
pay for the bags?
b. At a women’s wear trade show, you find a line of handbags that you like with a suggested
retail price of
$130
. The vendor has offered you trade discounts of
30/20/5
. Will this series
of trade discounts allow you to keystone the handbags?
c. (Challenge) The vendor tells you that the first two discounts,
30%
and
20%
, are fixed, but
the
5%
is negotiable. What trade discount, rounded to a whole percent, should you request in
order to keystone the markup?
Top U.S. Shopping Centers
Gross Leasable Area (GLA) in sq ft
King of Prussia Mall King
ofPrussia, Pennsylvania
2,856,000
Mill Creek Mall
Erie, Pennsylvania
2,600,000
Del Amo Fashion Center
Torrance, California
2,500,000
markuP based on selling Price
In Section I, we calculated markup as a percentage of the cost of an item. The cost was the
base and represented
100%
. As noted, this method is primarily used by manufacturers and
100%
Section ii
8
calculating Percent markuP
based on selling Price
The calculation of percent markup based on selling price is the same as that for percent
markup based on cost except that the base (the denominator) changes from cost to selling
price. Remember, finding percent markup is a rate problem using the now familiar percentage
formula
Rate =Portion ÷Base
.
8-5
markup based on selling priceWhen
selling price is
100%
and the markup is
expressed as a percent of that selling price.
85461_ch08_hr_229-261.indd 237 9/23/15 4:47 PM
Review exeRcises
For the following items, calculate the missing information. Round dollars to the nearest cent
and percents to the nearest tenth of a percent.
Item Cost
Amount of
Markup Selling Price
Percent
Markup
Basedon
Cost
Percent
Markup
Basedon
Selling Price
1. Sink
$65.00
$50.00
$115.00
43.5%
5. Magazine
60%
37.5%
6. Flashlight
53.8%
35%
7. Dollhouse
$71.25
$94.74
$165.99
133%
57.1%
8. Bar of soap
$1.18
$.79
$1.97
66.9%
40.1%
61.3%
38%
$714.45
55%
150%
88.7%
47%
8
Section ii
ExAmplE11 Converting Between
Markup typeS
At Walmart, a Panasonic sound system is marked up
25%
based on selling price. What
is the corresponding percent markup based on cost? Round to the nearest tenth of a
percent.
SolutionStrategy
tryitexerciSe 11
At Video Outlet, a PlayStation 4 game is marked up
75%
based on selling price. What is the
corresponding percent markup based on cost? Round to the nearest tenth of a percent.
SeCtion ii • Markup BaSed on Selling priCe 241
100% −25% =75%
X
=
33.3%
85461_ch08_hr_229-261.indd 241 9/23/15 4:47 PM
33.1%
$75.00
45%
$133.50
60%
Solve the following word problems. Round dollars to the nearest cent and percents to the
nearest tenth of a percent.
13. You are the manager of Midtown Hardware. If the EnergyMax batteries in your advertisement
have a cost of
$3.25
,
a. What is the amount of the markup on these batteries?
b. What is your percent markup based on selling price?
c. If the vendor reduces the cost to
$2.90
as a promotional trade discount this week, what is
your new amount of markup and what is the percent markup based on selling price?
14. A distributor purchases zero-turn mowers at a cost of
$8,200
and sells them for
$11,500
.
a. What is the amount of the markup?
b. What is the percent markup based on selling price?
15. Waterbed City purchases beds from the manufacturer for
$212.35
. If the store policy is to mark
up all merchandise
42%
based on selling price, what is the retail selling price of the beds?
16. Video Depot uses a
40%
markup based on selling price for its video game systems. On games
and accessories, they use a
30%
markup based on selling price. (See advertisement.)
a. What is the cost and the amount of the markup of the video game system?
b. What is the cost and the amount of the markup of the Sports Package game?
c. As a promotion this month, the manufacturer is offering its dealers a rebate of
$5.50
for each
additional remote sold. What is the cost and percent markup (rounded to the nearest tenth of
a percent) based on selling price?
SP
39.00
17. Galaxy Tools manufactures an
18
-volt drill at a cost of
$38.32
. It imports rechargeable battery
packs for
$20.84
each. Galaxy offers its distributors a “package deal” that includes a drill and
two battery packs. The markup is
36%
based on selling price. What is the selling price of the
package?
18. You are the buyer for The Shoe Outlet. You are looking for a line of men’s shoes to retail for
$79.95
. If your objective is a
55%
markup based on selling price, what is the most that you can
pay for the shoes to still get the desired markup?
19. If the markup on a sofa is
45%
based on selling price, what is the corresponding percent
markup based on cost?
EnergyMax
+1C
+1AAA
+1AA
242 Chapter 8 • Markup and Markdown
85461_ch08_hr_229-261.indd 242 9/23/15 4:48 PM
20. If the markup on a scanner is
180%
based on cost, what is the corresponding percent markup
based on selling price?
21. A purse has a cost of
$21.50
and a selling price of
$51.99
.
a. What is the amount of markup on the purse?
b. What is the percent markup based on cost?
C
21.50
c. What is the corresponding percent markup based on selling price?
22. As the manager of Speedy Supermarket, answer the following questions.
a. If
2
-liter Bubbly-Cola products cost Speedy
$16.50
per case of
24
bottles, what are the
amount of the markup and the percent markup on selling price per case?
b. If
12
-pack Bubbly-Cola products have a markup of
$8.25
per case of six
12
-packs at
Speedy, what are the cost and the percent markup on selling price per case?
c. Why has Speedy Supermarket chosen to use markup based on selling price?
Business Decision: incReasing the MaRgin
23. If Costco pays
$37.50
for the vacuum cleaner shown here,
a. What is the percent markup based on selling price?
b. If Costco pays
$1.50
to the insurance company for each product replacement policy
sold, what is the percent markup based on selling price of the vacuum cleaner and policy
combination?
c. If
6,000
vacuum cleaners are sold in a season and
40%
are sold with the insurance policy,
how many additional “markup dollars,” the gross margin, was made by offering the policy?
d. (Optional) As a housewares buyer for Costco, what is your opinion of such insurance
policies, considering their effect on the “profit picture” of the department? How can you
sell more policies?
•
•
SeCtion ii • Markup BaSed on Selling priCe 243
Review exeRcises
For the following items, calculate the missing information. Round dollars to the nearest cent
and percents to the nearest tenth of a percent.
Item
Original
SellingPrice
Amount of
Markdown Sale Price
Markdown
Percent
1. Fish tank
$189.95
$28.50
$161.45
15%
6. Suitcase
$68.00
$16.01
$51.99
23.5%
35%
$15.90
25%
11. A home theater system that originally sold for
$4,700
was marked down and sold for
$3,900
.
a. What is the amount of the markdown?
b. What is the markdown percent?
12. A soccer ball that originally sold for
$24.66
at Target was marked down by
$10
.
a. What is the sale price?
b. What is the markdown percent?
13. a. A notebook that originally sold for
$1.69
at Dollar General was marked down to
$0.99
.
What is the amount of the markdown on these notebooks?
b. What is the markdown percent?
c. If the sale price is then marked up by
40%
, what is the new selling price?
8
Section iii
Complete worked-out solutions for
Exercises 1–10 appear in Appendix B.
What would eventually become Target
began in 1902 as Dayton’s Dry Goods
Company. The company entered the
mass-market retail world in 1962,
the first SuperTarget, which includes
an in-store grocery, opened. In 1999,
architect Michael Graves, the first
now exceed
$60
billion.
SeCtion iii • MarkdownS, Multiple operationS, and periShaBle goodS 249
$53.88
$37.50
$264.95
30%
$24.66
40%
PAPER TRAIL
BRIGHT WHITE INKJET PAPER
• Acid free
• 24 lb, 108+ bright
Quantities limited. Sorry, no rainchecks or substitutions.
Valid for in-stock items only. Coupon redeemable in store only.
(256-571) Coupon Code 7979
Office Market
14. You are shopping for a headset and webcam at the Micro-Electronics Warehouse so that you
can video-chat with your friends.
a. Verify the “regular price” (original price) of each headset in the ad and calculate which
headset offers the greater markdown percent, the BuddyChat
200
or BuddyChat
300
.
b. What is the markdown percent on the BuddyCam HD webcam?
c. You have decided to purchase the headset with the greatest markdown percent and the
BuddyCam HD webcam in order to take advantage of an “Extra
$15
Rebate” offer when
you purchase both. What is the markdown percent on your total purchase including the
rebate?
15. If a file cabinet selling for
$98
is put on clearance sale at
60%
off, what is the selling price?
16. Carousel Toys has Romper Buckaroos, wooden rocking horses for toddlers, on a
30%
markdown sale for
$72.09
. What was the original price before they were marked down?
Roundto the nearest cent.
17. Lawn and Garden Galleria is having a
20%
off sale on riding lawn mowers. The XL Deluxe
model is on sale for
$4,815
. What was the original price of the mower?
18. From the Office Market coupon shown here,
a. Calculate the markdown percent.
b. If the offer was changed to “Buy
3,
Get
2
Free,” what would be the new markdown
percent?
c. Which offer is more profitable for the store? Explain.
After Savings
Save $12
$29.99
After Savings
Save $20
250 Chapter 8 • Markup and Markdown
85461_ch08_hr_229-261.indd 250 9/23/15 4:48 PM
19. In February, Golf World, a retail shop, purchased golf clubs for
$453.50
per set. The original
markup was
35%
based on selling price. In April, the shop took a
20%
markdown by having
a special sale. After two weeks, the sale was over and the clubs were marked up
10%
. In June,
the shop offered a storewide sale of
15%
off all merchandise, and in September, a final
10%
markdown was taken on the clubs. What was the final selling price of the golf clubs?
20. Prestige Produce purchases
460
pounds of sweet potatoes at
$0.76
per pound. If a
10%
spoilage rate is anticipated, at what price per pound should the sweet potatoes be sold to achieve
a
35%
markup based on selling price?
21. A microwave oven cost The Appliance Warehouse
$141.30
and was initially marked up by
55%
based on selling price. In the next few months, the item was marked down
20%,
marked
up
15%
, marked down
10%
, and marked down a final
10%
. What was the final selling price of
the microwave oven?
22. The Flour Power Bakery makes
200
cherry cheesecakes at a cost of
$2.45
each. If a spoil-
age rate of
5%
is anticipated, at what price should the cakes be sold to achieve a
40%
markup
based on cost?
23. You have decided to purchase a set of four Good-Ride tires for your vehicle at the Tire
Emporium.
a. If the original price of these tires is
$160.00
each, what are the amount of the markdown
with rebate per tire and the markdown percent if you get the rebate and pay cash?
b. What are the amount of the markdown per tire and the markdown percent if you decide to
put the purchase on your Good-Ride credit card and get the double rebate?
Good-Ride Raven GT – Tire Sale
SeCtion iii • MarkdownS, Multiple operationS, and periShaBle goodS 251
85461_ch08_hr_229-261.indd 251 9/23/15 4:48 PM
c. When you purchased the set of four tires, you were offered an “Extra
5%
” discount on the
entire purchase if you also included wheel balancing at
$5.75
per tire and a front-end align-
ment for
$65.00
. The sales tax in your state is
7.5%
. What was the total amount of your
purchase if you used your Good-Ride credit card? Use the unrounded markdown percent
you found in part b in your calculations.
d. What are the advantages and disadvantages of using the credit card?
Business Decision: the peRManent MaRKDown
24. You are the manager of World Wide Athlete, a chain of six sporting goods shops in your area.
The shops sell
12
racing bikes per week at a retail price of
$679.99
. Recently, you put the bikes
on sale at
$599.99
. At the sale price,
15
bikes were sold during the one-week sale.
a. What was your markdown percent on the bikes?
b. What is the percent increase in number of bikes sold during the sale?
c. How much more revenue would be earned in six months by permanently selling the
bikes at the lower price rather than having a one-week sale each month? (6 sale weeks in
26weeks)
d. (Optional) As manager of World Wide, would you recommend this permanent price reduc-
tion? Explain.
252 Chapter 8 • Markup and Markdown
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