BUYING AND

SELLING
 BUYING AND SELLING
• PRICING
Setting prices is another business application of our knowledge on percentage. In
trading or merchandising firms, those who do “buy and sell”, meaning what they buy,
they sell, and in manufacturing firms, those who buy raw materials, process them and
sell the finished products, and make use of pricing decisions. Setting the right price is
important for good to sell. If the price is too high, the customers may not be able to
afford it; if it is set to low, the company may not be able to make a profit considering
that it is not only the cost of the product that is to be taken into consideration. There
are also the operating expenses, both administrative and selling, to be considered. The
selling price should be able to absorb the cost and the operating expenses and still give
a margin for the company to earn a profit.
 BUYING AND SELLING

• Cost – refers to the purchase of an article. If a trader bought a product for P

100.00, this is the cost of the products as far as the trader is concerned.
• Initial mark up or mark on refers to the amount added to cost to arrive at the
original selling price. It is sometimes, referred to a margin,. In other workds,
it is the difference between the original selling price and the cost.
• Additional mark up refers to amounts added to the original selling price to
arrive at a new selling price.
 BUYING AND SELLING
• For business mathematics purpoe, we shallrefer to both mark on or initial
mark up and additional markup as “markup” only.
• Mark up cancellation refers to the decrease in the new selling price that does
not decrease it below the original selling price. As long as the new lowered
price does not go below the original selling price he or she has previously set,
the rpice reduction shall be termed as mark up cancellation.
• Mark up cancellation refers to reductions in selling price that do not reduce
below the original selling price.
 BUYING AND SELLING
• Markdown refers to the reduction in the original selling price.
• For business Mathematics, we shall refer to both mark up cancellation and
markdown as “ markdown “ only.
 DIFFRENCE BETWEEN MARK UP AND
MARGIN
• Margin ( also known as gross margin) is sales minus the cost of goods sold.
Gross margin is easier to arrive at and is, therefore, easier to use as well. This
is calculated as the margin divided by sales. This is the mark up based on
sales or selling price.
• Markup is the amount by which the cost of a product is increased in order to
derive the selling price. Stated as percentage, it is calculated as the mark up
divided by the product cost. This is the mark up based on cost.
 COMPUTATIONS FOR MARGIN AND
MARK UP
MARGIN
MARK UP BASED MARKUP BASED
ON SALES ON COST

COST ₱ 140.00 70.00% 100.00%

MARK UP ₱ 60.00 30.00% 42.86%

SELLING
PRICE ₱ 200.00 100.00% 142.86%
 MARK UP BASED ON COST

• The difference between the sales ( selling price)

and the cost of goods sold or cost of sales (cost )
is the gross profit or margin, which is also the mark
up.
 Markup based on cost
• Sales ( Selling price )………………………………..P 450.00
• Cost of goods sold…………………………...………300.00
• Gross profit ( mark up)………………………… …...150.00
 MARK UP BASED ON SELLING PRICE
( MARGIN)
• Mark up is expressed as a percent of selling price.
The selling price is the base.
Markup based on cost or based on selling price

• Selling price …………..P 450.00 150% ( Selling price/cost)

• Cost …………………….300.00 100% ( Cost / cost)
• Mark up …………………150.00 50% ( markup/cost)
 MARKDOWN

• Traders would sometimes reduce the selling price to get

rid of slow moving merchandise or out of style
inventories to stimulate increased sales or to meet the
prices of competitors. We shall refer to all these
reduction in selling prices as markdown.
 PROBLEM SOLVING
• 1. Vida is a student who does buy and sell on her spare time. She buys and
sells anything she believes her classmates or schoolmates would buy.If she
bought a perfume for P 1,500.00 a bottle and she wanted a mark up of 20 %
on cost, how much will she sell it for? If she wants a markup of 20% based
on selling price , how much will be her mark up?
1. Vida is a student who does buy and sell on her spare time. She buys and sells
anything she believes her classmates or schoolmates would buy. If she bought a
perfume for P 1,500.00 a bottle and she wanted a mark up of 20 % on cost,
how much will she sell it for? If she wants a markup of 20% based on the
original selling price , how much will be her mark up?
• Cost ………………………………..P 1,500.00
• Plus: Initial mark up or mark on 300.00
• Original Selling price ………………………… 1,800.00
• Plus : Additional mark up ………………………. 360.00
• New selling price………………………………..2,160.00
If the trader, Vida saw that her new selling price of P2,160.00 is not
appealing to customers, she may decide to lower her price. She
finally decided to reduce the price further back to the original selling
price.
• New selling price………………………………………….P 2,160.00
• Less: Mark up cancellation………………………………... 120.00
• Reduced Selling price ……………………………………. 2,040.00
• Less:Markup cancellation………………………………… 240.00
• Original Selling Price…………………………………….. 1,800.00
• P 360.00 pesos is the total markup cancellation.
If Vida reduces her selling price from P 1,800.00( original
selling price) to P 1,600.00 the P 200.00 reduction in selling
price is termed mark down. If she further decided to
reduce it to P 1,500.00, the P100.00 reduction in selling
price is markdown
If Vida reduces her selling price from P 1,800.00( original selling price) to P
1,600.00 the P 200.00 reduction in selling price is termed mark down. If she
further decided to reduce it to P 1,500.00, the P100.00 reduction in selling
price is markdown
• Original selling price………………………………………P 1,800.00
• Less: Markdown……………………………………………… 200.00
• New reduced selling price……………………………………1,600.00
• Less: markdown……………………………………………….100.00
• New reduced selling price ……………………………………1,500.00
 Mark up cancellation and markdown
• NOTE:
• BOTH MARK UP CANCELLATION AND MARKDOWN IS
REFERRED TO AS MARKDOWN.
Mark up based on csot