Amy has a master's degree in secondary education and has taught math at a public charter high school.
All businesses do it. If they didn't do it, they would die. What is it? Markup. It's markups that give businesses the profit they need to grow and make even more products. But what happens when the business slows down? That's when a business uses markdowns to help encourage more customers to purchase. Markdown is seen when businesses lower their prices, give out coupons, and have special sales events.
Markup:
Markdown:
Practice calculating markup and markdown with the following scenarios.
Use these questions to help analyze the following scenarios and figure out what kind of calculations are needed.
Mark designs his own unique line of T-shirts for sale at his shop in the downtown square. He wants to make a profit of at least 100% on each shirt he sells. If his shirt costs $8 to make, including the time he spent designing the artwork, how much does Mark's markup need to be in order for him to make 100% profit on each shirt?
This scenario is talking about markups because Mark wants to make a profit. Mark also wants to know an actual amount. So, performing those calculations, Mark gets this:
| $8 * 100% = $8 * 1 = $8 |
Mark's markup amount is $8. So, each shirt needs to cost $8 + $8 = $16 or more for Mark to make at least 100% profit on each shirt.
Mark is also planning ahead and he knows there will be times when he offers coupons to help him increase his sales. He is willing to go down to as much as 50% profit on each shirt. How much of a markdown percentage is this?
For this scenario, Mark needs to make markdown calculations for percentage. But first, he needs to figure out how much a shirt at 50% profit costs.
| $8 * 50% = $8 * 0.5 = $4 |
So, a shirt at 50% profit is $8 + $4 = $12.
This means a decrease in price of $16 - $12 = $4 from the shirt at 100% profit. Now, what percentage markdown does this translate to? Making the calculations, Mark gets this:
| $4 / $16 = 0.25 = 25% |
This means that Mark can give out coupons for as much as 25% off but no more, otherwise he won't make 50% profit on his shirts.
Another thing Mark does to encourage sales involves a loyalty program. When people sign up, they get to choose a special month, say that of an anniversary or graduation) and all month long they get to enjoy $2 off each and every shirt. How much of a discount percentage is this?
This scenario talks about markdown percentages, so those calculations are needed. Making those calculations, Mark gets this:
| $2 / $16 = 0.125 = 12.5% |
That makes for a 12.5% discount on all shirts.
The lesson Markup & Markdown: Calculation & Examples has more example problems.
To unlock this lesson you must be a Study.com Member.
Create your account
Already a member? Log In
BackAlready registered? Log in here for access
Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.
To learn more, visit our Earning Credit Page
Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.
Back To Course
Business Math: Skills Development & Training10 chapters | 74 lessons
{{courseNav.course.topics.length}} chapters | {{courseNav.course.mDynamicIntFields.lessonCount}} lessons | {{course.flashcardSetCount}} flashcard set{{course.flashcardSetCoun > 1 ? 's' : ''}}
Watch 5 minute video clips, get step by step explanations, take practice quizzes and tests to master any topic.
Study.com has a library of 750,000 questions and answers for covering your toughest textbook problems
I love the way expert tutors clearly explains the answers to my homework questions. Keep up the good work!
- Maritess, College StudentStudy.com video lessons have helped over 30 million students.
"I learned more in 10 minutes than 1 month of chemistry classes"
- Ashlee P.
"I learned more in 10 minutes than 1 month of chemistry classes"
- Ashlee P.
"I aced the CLEP exam and earned 3 college credits!"
- Clair S.
Over 65 million users have prepared for {{displayNameByProductKey[registrationData.product || testPrepCocoon]}} and other exams on Study.com
"The videos have changed the way I teach! The videos on Study.com accomplish in 5 minutes what would take me an entire class."
- Chris F.
Over 65 million users have prepared for {{displayNameByProductKey[registrationData.product || testPrepCocoon]}} and other exams on Study.com
