To find the markup of goods, the formula to use is selling price of product = product cost + markup. An example of this type of problem is when a retailer buys an item at $6 (cost) and sells it at $7.20. Using the formula and this information, students can calculate the markup and the markup percent rate.
To make a profit, store owners use a selling price that is based on the original cost of an item and a markup percent rate. These types of problems entail finding the percent change relative to the original product cost of items.
- Use the formula to calculate the markup
- Find the markup percent rate
Substitute the values for the selling price and cost of product into the formula selling price of product = product cost + markup to get $7.20 = $6 + markup. Subtract $6 from both sides to find the markup as $1.20.
Calculate the markup percent rate by knowing that the markup of $1.20 is a percent Y of the original product cost, or 1.20 = Y x 6. Find Y by dividing both sides of the equation by 6 to get the answer as 0.2. Convert 0.2 to a percentage by multiplying it by 100 percent to arrive at the answer of 20 percent as the markup percent rate.
If the store owner wants a higher selling price than $7.20, then he needs to use a markup percent rate that is higher than 20 percent for the given cost of $6.