Markup
In short: Markup is the extra money a retailer piles onto what it paid for goods before putting them on the shelf, usually stated as a percent of that purchase cost.
7th GradeRatios and Percents7.RP.A.3
What is Markup?
The markup is the extra amount a shop stacks on top of what it paid a supplier, and it has to cover rent, wages and profit once the item is resold.
If the cost is \(c\) and the rate is \(r\) written as a decimal, then \(\text{extra amount} = c \times r\) and \(\text{selling price} = c + c \times r = c(1 + r)\). The percent is always measured against the cost, not against the selling price.
How to spot it
- A business paid a wholesale cost for goods and the problem asks for the price customers will see.
- The wording says priced at cost plus a percent, wholesale versus retail, or marked up.
- You are given the cost and the selling price and asked what percent was added.
- A word problem separates cost, added amount and final price into three different dollar values.
The method
- Write down the cost the seller paid and the percent rate as a decimal.
- Multiply cost by rate to get the extra dollars added.
- Add that amount to the cost to get the selling price, or compute \(c \times (1 + r)\) directly.
- To find the rate from two prices, divide the added dollars by the cost.
Markup: solved example
Problem
A skate shop in Portland pays \(\$56\) for a board deck and adds 25% of its cost on top. What price does a customer pay?
Solution
Extra amount:\(56 \times 0.25 = 14\) dollars.
Selling price: \(56 + 14 = 70\). The deck sells for \(\$70\).
Try it
Question 1
A florist buys roses at \(\$1.20\) each and sells them at \(\$3.00\) each. What percent of cost was added?
Show the answer
The added amount is \(3.00 – 1.20 = 1.80\). Then \(\frac{1.80}{1.20} = 1.5\), so 150% of the cost was added.
Question 2
A bakery pays \(\$38\) for an oven mitt set and adds 40% of that cost. Find the selling price.
Show the answer
\(38 \times 1.40 = 53.20\), so the price is \(\$53.20\).
Markup vs. Discount
A markup raises a price starting from what the seller paid, and it is based on the cost. A discount lowers a price starting from the tag price, and it is based on the tag price. The two start from different bases, so adding 20% and then taking off 20% does not return to the original cost.
Keep going
Lessons
Worksheets and quizzes
- Percent Problems: Tax, Tips, Discounts and Markups – Worksheet
- Percent Problems: Tax, Tips, Discounts and Markups – Quiz
Related words
Whole dictionary: A–Z · 7th Grade · Ratios and Percents