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2.2 Markup & Discount

2.2 Markup & Discount
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  • Math Help

    The terms "markup" and "markup percent" are technical terms that are used in business. Be sure you understand the definition of each. Both terms are commonly misused and misunderstood.

    Markup: Technically this term only applies to retail (or reselling) businesses. If a retail business buys an item for $10 and sells it for $15, then the markup is $5. The term markup is not applied to businesses that manufacture (or significantly alter) items. For instance, it is not fair to say that a pharmaceutical company that pays $0.10 for the ingredients in a pill and sells the pill for $1.10 has a markup of $1.

    Markup Percent: When using the term markup percent, be sure that the numerator is the markup and the denominator is the wholesale price. On page 64, you will see that this differs from the term "discount percent." When calculating discount percent, the denominator is the retail price.

  • Consumer Suggestion

    Have you ever wondered what products you purchase have significant markups? Visit The Consumerist to see a list of the five retail mark-ups to watch out for.

  • Checkpoint Solution

    To find the markup percent for each item, divide the markup by the wholesale price.

    1. Automobile:

      The markup percent is about 10%. This is a typical markup rate for a new car. For used cars, the markup rate is often higher.

    2. Leather Chair:

      The markup percent is about 240%. This is a typical markup rate for new furniture. Having a very high markup rate is what allows furniture stores to have high discount sales.

  • Comments (2)

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    system user
    Jackie (moderator)5 years ago |
    Unfair markup prices can land a company in trouble, as a Colorado pharmacy is finding out due to a new investigation against the company.

    Find out more about this case and markup prices on the andYOU blog:

    http://www.andyou.com/blog/math-in-the-news/math-in-the-news-markups/
    0
    system user
    Ron Larson (author)6 years ago |
    According to the Web site http://www.toptenz.net/, the greatest markups occur on the following products.

    1. Prescription Medicine
    2. Movie theater popcorn/candy
    3. Glasses frames
    4. Jewelry/diamonds
    5. Brand name clothing
    6. Restaurant drinks (wine and soda)
    7. Mattresses and furniture
    8. Greeting cards
    9. Bottled water
    10. Cosmetics
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