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MATHEMATICS OF RETAILING
Retailers are in the business of buying and selling goods for profit. Some of sectors
involved are;
Selling price: thepriceof merchandisebeing sold (also known as retail price)
Cost: the price paid for merchandise which include net price, buying expenses,
transportation and handling goods.
A. Markup
Markup: thedifference between thecost and selling price.
Sclling pricc (rctoil pricc) =Cost +Hork up
Horkup =sclling pricc cost

Markup can bein percentageor ringgit amount.
a. % of markup based on selling price=
Horkup
Sclling pricc
100%
b. % of markup based on cost =
Horkup
Cost
100%

Example A
1. A retailer bought a belt that cost RM50.00 and plan to sell thebelt at RM65.90. Find
(i) the markup amount, (ii) the markup percentagebased on selling price, and (iii)
themarkup percentagebased on cost price.





2. Thecost of a refrigerator is RM3,000. If theseller wants a20% markup based on
thecost, find (i) markup, and (ii) retail price.





3. Retail priceof a television LED is RM3,900. A retailer would liketo markup about
15% based on theretail price, find (i) markup and (ii) cost.






4. Bibiyantis LittleKitchen produces 1000 muffins per day, which cost RM0.50 each.
If theowner wants to markup 30% based on cost of each muffin, find (i) the retail
priceof onemuffin, (ii) theoverall income for aday if only 80% of themuffins sold.







B. Markdown
Markdown: thereduction fromtheselling price. Also know as tradediscount.

HorkJown =0riginol sclling pricc Ncw sclling pricc
% o morkJown =
HorkJown
0riginol Sclling Pricc
100%

If using theformula fromtradediscount;
Trade discount amount =Ir
Nct pricc =I(1r)

Original selling price = List price
New selling price = Net price
Markdown = trade discount amount
% of markdown = discount rate



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Example B
1. The markdown value of a blouse is RM5.50. If the previous selling price is
RM59.00, find thenew selling price.



2. Percent markdown of a watch is 10%. If thenew selling priceis RM500.00, find the
old selling priceof this watch.




3. Yannie produces 1,500 cupcakes per day, which cost RM1.50 each. If the owner
wants to markup 40% based on cost of each cupcakes, find (i) theretail price of one
each cupcakes, (ii) Suppose 100 cupcakes werenot sold. To sell off theremaining
cupcakes, the retailer gave 10% discount fromthe original selling price. Find the
total incomefor that day.






C. Profitability and Loss
List price: Pricethat is listed or displayed
Operating Expenses: theexpenses incurred in therunning of abusiness
Net Profit: theamount left after deducting operating expenses fromthemarkup.
Breakeven: theretail pricewhich, thereis no gain or lost.

0ross Proit =0pcroting Expcnscs +Nct Proit
Sclling Pricc (or rctoil pricc) =Cost +0ross Proit
Sclling Pricc = Cost +Nct Proit +0pcroting Expcnscs


To determinewhether gain profit of suffer loss, then

Net profit >0, then, it is a profit
Net profit =0, then, it is a break-even
Net profit <0, then, it is a loss

To determinethepricewherethereareno gain or loss,
Brcokc:cn pricc =Cost +0pcroting Expcnscs

Example C
1. A computer tableis purchased for RM120. Operating expenses amount to 30% of
thecost. If the retailer wants a 15% net profit based on cost, find (i) thenet profit,
(ii) the retail price, (iii) gross profit, (iv) break-even price, (v) the maximum
markdown payment, and (vi) if theretail priceis RM220, find theprofit or loss.







2. A retailer bought aDSLR camera for RM5600. Operating expenses amount to 15%
of thecost. If the retailer wants a20% net profit based on selling price, find (i) the
operating expenses, (ii) theretail price, (iii) gross profit, (iv) break-even price, (v)
the maximummarkdown payment, and (vi) if theretail priceis RM6020, find the
profit or loss.









If
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3. Shu-Shu shoe company bought 100 pairs of shoes for RM2, 750. The company
wanted a gross markup and net profit of 20% and 15% of the cost respectively. (i)
Find the selling pricefor apair of shoe, (ii) Find theoperating expenses for a pair of
shoe, (iii) Suppose15 pairs werenot sold. To sell off theremaining shoes, theretailer
gave20% discount fromtheoriginal selling price. Find thenew total gross profit.









4. A retailer bought 25 swimming suits. A gross profit of 45% based on cost is madeif
thesuits were sold at RM150 each. The operating expenses were 15% based on cost.
(i) Find thetotal cost, (ii) Find thenet profit if all the suits were sold, (iii) Suppose5
suits were not sold. To sell off the remaining suits, the retailer gave20% discount
fromtheoriginal selling price. Find thetotal gross profit.








D. Trade discount and Mathematics of Retailing
Cost: theprice paid (or amount paid or amount of payment) for merchandisewhich
include net price, buying expenses, transportation and handling goods.

Example D
1. The PC Demo Trading received an invoice dated 22 September 2012 for the
purchase of 15 units of printers. The invoice was worth RM9, 800 including the
transportation cost and insurancecharges of RM 260. Theinvoiceoffered a 6% trade
discount and cash discount terms of 3/15,2/25,n/30. The invoice was paid on 7
October 2012. (i) Calculate the amount of payment made on thesettlement date. PC
Demo Trading estimated a net profit of 15% on the selling price. If the operating
expenses were7% based on the cost, find (ii) theselling priceof each printer (iii) the
breakeven price of each printer (iv) themaximumpercentage of markdown that can
beoffered so thetrader would not suffer any loss.









2. An owner of a laundry shop received an invoice for purchasing 200 bottles of liquid
detergent at RM15 each, and 300 bottles of fabric softener at RM8 each. The
invoicedated on 6
th
August 2010. Hewas offered tradediscount 10% and 8%, with
cash discount 10/10, 5/20, n/30. The owner then paid theinvoice on 21
st
August
2010. (i) Calculatethenet pricefor a bottleof liquid detergent. (ii) Calculatethenet
pricefor a bottleof fabric softener. (iii) Find theamount of payment on 21
st
August
2010. (iv) If theowner wanted a 10% net profit based on cost of all items and 15%
operating expenses based on cost of all items, find the selling price of a bottle of
liquid detergent and find theselling priceof a bottleof fabric softener.










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Exercise 8
1. Steady Music Center purchased 10 units of theoriginal CD at RM29.90 each. If the
seller wishes to makea net profit of 12% based on theselling priceand theoperating
expenses wereRM3 per unit, find (i) theselling priceof each original CD, (ii) the
total gross profit madeby theseller.
2. A retailer purchased 20 toasters at a list price of RM40 each and was offered trade
discounts of 10%, 8%. Hethen sold thetoasters with a gross profit of 75% based on
thecost. If the operating expenses was 15% based on the selling price, find (i) thenet
priceof each toaster after thetrade discounts, (ii) theselling priceof each toaster, (iii)
thebreakeven priceof each toaster, (iv) themaximummarkdown of each toaster that
could begiven without incurring any loss.
3. A retailer bought a massage chair for RM5,000. Operating expenses incurred were
5% based on cost. Theretailer wanted a10% net profit based on cost. (i) Calculate
the selling price, (ii) Calculate the markup percent based on the selling price, (iii)
Calculate the breakeven price, (iv) However after a while, the price was marked
down by 10% and later sold. Did theretailer suffer any loss?
4. Theowner of Perabut Alaf Baru bought a living roomset at RM2.800. Theoperating
expenses of selling the set are25% of thecost. If theseller wants a net profit of 15%
on the cost, calculate the (i) selling price of the living roomset, (ii) gross profit
obtained, (iii) breakeven price, (iv) maximumpercentage of markdown that can be
offered without incurring any loss. (v) If theseller sets theselling priceat RM3,600,
what is thenet profit.
5. A retailer bought a treadmill for RM2,000. Operating expenses incurred were 5%
based on cost. Theretailer wanted a 10% net profit based on cost. Find (i) theselling
price, (ii) markup percent based on theselling price, (iii) the breakeven price, (iv) the
new selling price and thetotal net profit or loss if the retailer sold thetreadmill at10%
markdown.
6. A retailer bought 10 mowing machines at RM888 each. He was offered trade
discounts of 10%, 5% and thecredit terms were 4/10, n/30. Healso had to pay RM60
for transportation costs. Later, he sold these machines with a markup of 30% on
selling price. For each machine, thenet profit obtained was RM95. Find (i) the total
payment madefor all themachines ten days fromthe dateof invoice, (ii) its selling
price, (iii) its breakeven price, (iv) its maximummarkdown ratethat can beoffered
without incurring any loss, (v) the amount that theretailer would gain or loss if he
offered a discount of 10%.
7. A trader bought 20 football jerseys listed at RM5,000 with trade discounts of 20%
and 10%. If hesold thejerseys at a net profit of 30% based on cost and theoperating
expenses were 5% on cost, find (i) the amount paid by thetrader, (ii) theselling price
for each jersey, (iii) the breakeven price for each jersey, (iv) the amount that the
trader would gain or loseif heoffer a discount of 15%.