Lecture Notes: Calculating Markup

Introduction to Markup

• Speaker: Steve Jones
• Topic: How to calculate markup

Definition of Markup

• Markup:
  • The difference between the purchase price and the sale price when selling a product.
  • It represents the added amount (profit) on top of the purchase price to determine the sale price.
• Formula:
  • Markup = (Difference in Price) / (Purchase Price)

Example Calculation

• Given:
  • Purchase Price: $100
  • Sale Price: $120
• Calculation:
  • Difference in Price: $120 - $100 = $20
  • Markup Proportion: $20 / $100 = 1/5
  • Percentage: Multiply proportion by 100 to get the markup percentage.
  • Markup Percentage: 20%

Practical Application

• Example:
  • If an item costs $2,000, a 20% markup means:
    • Markup Amount: $2,000 x 20% = $400
    • Sale Price: $2,000 + $400 = $2,400

Conclusion

• In business, marking up prices is essential to cover costs and achieve profit.
• Understanding how to calculate markup is crucial for pricing strategies.