Ch 7 Mathematics of Selling

1
Ch 7 Mathematics of Selling

• Markup Based on Cost

2
Objective 1

• Recognize Terms in Selling

3
Terms Used In Selling

• Cost
• Amount paid after trade cash discounts.
• Also includes shipping/insurance.

???
4
Terms Used In Selling

• Selling Price
• Is the price at which merchandise offered for
  sale to the public.

5
Terms Used In Selling

• Markup (Margin) (Gross Profit)
• Is the difference between the cost and the
  selling price.

17
32
Item Cost 15
Selling Price 32
Markup 32 - 15 17
15
6
Terms Used In Selling

• Operating Expenses
• The expenses incurred while running a business.
• Wages Salaries
• Rent for Building and Equipment
• Utilities
• Insurance
• Advertising
• Postage (see page 260)

7
Terms Used In Selling

• Net Profit
• Is the amount (if any) remaining for the business
  after operating expenses and the cost of goods
  have been paid.

7
17
Item Cost 15
10
Selling Price 32
15
Operating Expenses 10
Net Profit 32 - 15 - 10 7
8
Terms Used In Selling

• Compute Markup
• Based on Cost
• Manufacturers (also some wholesalers, retailers)
• Based on Selling Price
• Retailers

9
Objective 2

• Markup Formula

10
Basic Markup Formula
Cost Markup Selling Price

• Cost Markup Selling Price

Cost
Operating Expenses
Net Profit
Markup
11
Solving Markup Problems
C M S
12
Objective 3 4

• Solve Markup Problems

13
Compute Markup Based on Cost 1 of 2

• Compute the percent markup on cost
• Item Cost 15
• Selling Price 20
• Markup _____

20 15
5
100 ? ?
C M S
15 20
14
Compute Markup Based on Cost 2 of 2

• Compute the percent markup on cost
• Item Cost 45
• Selling Price 87.50
• Markup _____

87.50 45
42.50
100 ? ?
C M S
45 87.50
15
Markup Based on Cost

• Use Markup Rate to Set Selling Price

16
Use Markup Rate to Set Selling Price 1 of 3

• Determine the markup and the selling price for a
  Casio watch if the cost is 17.50 and the markup
  rate is 20.

100
20
120
C M S
3.50
21.00
17.50
????
????
17.50 3.50
17
Use Markup Rate to Set Selling Price 2 of 3

• 19, page 268
• The cost of some socket-wrench sets from Taiwan
  is 10.36 per set. Harbor Tool decides to use a
  markup of 25 on cost. Find the selling price of
  the socket wrench set.

100
25
125
C M S
12.95
????
????
10.36
18
Use Markup Rate to Set Selling Price 3 of 3

• 21, page 268
• Olympic Sports purchases Spalding Basketball
  systems at a cost of 180 each. If the companys
  operating expenses are 16 of cost, and a net
  profit of 7 of cost is desired, find the selling
  price of one basketball system.

123
100
167
C M S
180
221.40
Cost
Operating Expenses
Net Profit
19
Markup Based on Cost

• Compute cost and selling price

20
Determine Cost and Selling Price 1 of 2

• Laptop computer has a markup of 45, which is 32
  based on cost.
• Compute the cost and selling price of the laptop.

32
100
C M S
140.63
45
185.63
140.63 45
21
Determine Cost and Selling Price 2 of 2

• 12, Page 267
• Cost _____
• Markup 54.38
• Markup on Cost 50
• Selling Price _____

50
100
C M S
108.76
54.38
163.14
108.76 54.38
22
Textbook Problems

• 18, 22, 23, 25 on page 268