CHAPTER 3 : BUYING

AND SELLING
MARK ON AND MARK UP
• Mark On. In the difference between the initial or the first
selling and the cost of the item.
• It is the initial or first amount added to the cost of an item
to cover the operating expenses, net profit, and final
adjustment.
Selling Price (SP) = Cost (C) + Mark On (MO)
• Mark-up is the difference between the new selling price and
the initial or previous selling price
New selling price (NSP)= Selling price (SP)+Mark-Up(MU)
MARK-ON BASED ON COST

• When based on cost, the mark-on is added to the cost of the

item to determine the selling price.
Selling price (SP) = Cost (C) + Mark-on (MO)
•  
Mark-on (Amount) = Cost (C) x MO Rate (MOR)
Mark-on Rate (MOR) =
Cost (C) =
MARK-ON BASED ON COST
• Example: If an item was purchased at P 35.00 and a mark on rate of
40% based on the cost was added, find the amount of mark-on and
the selling price.
Mark-on (Amount) = Cost (C) x Mark-on rate (MOR)
= P35.00 x 40%
MO = P 14.00
Selling Price (SP) = Cost (C) + Mark-on (MO)
= P35.00 + 14.00
= P 49.00
MARK-ON BASED ON COST
• Example: A retailer buys a dozen calculator at P 3,000. If his mark-
on rate based on cost is 25%, how much is the selling price of each
calculator?
Mark-on (Amount) = Cost (C) x Mark-on rate (MOR)
= P250 x 25%
MO = P 62.50
Selling Price (SP) = Cost (C) + Mark-on (MO)
= P250.00 + 62.5
= P 312.5
MARK-ON BASED ON SELLING PRICE

• When a retailer has to purchase to replenish a merchandise

whose is already given, the problem is to determine the cost
he shall pay for the merchandise and still have desired rate
of gross profit on the selling price.
•  
Mark-on (Amount) = Selling price x MO Rate (MOR) Based on selling
price
Mark-on Rate (MOR) based on selling price
=
MARK-ON BASED SELLING PRICE
• Example: A businessman wishes to have a selling price of P 50.40 for a stapler
which he bought for P 37.80. Find the a) Mark-on b) Rate of mark-on based
on selling price.
Mark-on (MO) = Selling Price (SP) – Cost (C)
= P 50.40 – 37.80
•   MO = P 12.60
Mark-on Rate (MOR) Based on Selling Price (SP)
=
=
MOR = 25%
MARK-ON BASED SELLING PRICE
• Example: A merchant bought a dozen shirts for P 2,100 and sold each shirt
for P 250. Based on the selling price, find the a) mark-on b) mark-on rate.
 Cost of one shirt =
= P 175.00

 Mark-on (MO) per shirt = Selling Price (SP) – Cost (C)

= P 250 – P 175
•  
MO = P 75.00
 Mark-on Rate (MOR) Based on Selling Price (SP)
=
=
MOR = 30%
MARK-UP
• Increase in the price from the old or original previous selling
price
New Selling Price (NSP)= Cost (C) + mark-on (MO) + mark-up (MU)
 NSP = Old Selling Price (OSP) + mark-up (MU)
•  
Mark-up Amount (MU) = Old Selling Price x mark-up rate (MUR)
Mark-up Rate (MOR) based on selling price
=
Original Selling Price =
MARK-UP
•
Example: If Mark-up rate of 15% is added to the original price of an item at P
120.00. How much is the new selling price?
Mark-up Amount = Original Selling price x Mark-up rate (MUR)
= P 120.00 x 15%
= P 18.00
New selling price = OSP + MU
= P120.00 + 18.00
= P 138.00
Solution 2:
New Selling Price (NSP) = OSP (1 x MUR)
= P 120.00 x (1+ 0.15)
= P 120.00 x 1.15
= P 138.00
MARK-DOWN
• Reduction in the price of the merchandise.
Mark-down Amount (MD) = Old Selling Price (OSP) – New Selling
Price (NSP)
•  
Mark-down Rate (MDR)=
Mark-down Amount (MD) = Old Selling Price x mark-down rate
(MDR)
New Selling Price = Old selling price (OSP) x (1-Mark-down rate
(MDR))
MARK-DOWN
• Example: NRS Corporation sold office equipment for P 16,830.00, which was
previously priced at P 18,700.00. Determine a) amount of mark-down b)
mark-down rate.
a) Amount of mark-down MD = OSP - NSP
= P18,700.00 – P 16,830.00
•   = P 1,870.00

b) Mark-down rate MDR=

=
= 10%
MARK-DOWN
• Example: During a mall-wide sale, a 5% mark-down was applied to an
electronic item priced at P 10,700. Find the a) new selling price, and b)
amount of mark-down.
a) New Selling Price NSP = OSP (1-MDR)
= P10,700.00 (1-0.05)
= P 10,165.00

b) Amount of mark-down MD=OSP - NSP

= P 10,700 – P 10,165
= P 535.00
1. A retailer buys ball pens at P 750.00 per box of 50 pieces. The suggested selling price for each ball pen
is P 19.50. Find the suggested mark-on rate based on cost for each ball pen.
2. A store sold a box of rubber band at P48.60. If the store added a mark-on rate of 35% based on cost,
how much did it purchase the box of rubber band?
3. A dealer of appliances purchased 18 DVD players at P 2,100 per unit. If he sold each unit at 30% mark-
on based on selling price, how much was the selling price per unit?
4. A grocery store plans to buy 12 dozens of canned goods at P 5,616 and get a 25% mark-on based on
selling price. How much will be the selling price per canned goods?
5. A businessman selling a radio at P 1,200. Due to the increase in his operating expenses, he decides to
add a mark-up of P 200. Find the new selling price and the rate of mark-up added to the original
selling price.
6. A dozen DVD players was purchased for P 21,600 and sold at 25% based on cost. If 10 DVD players
were sold and the remaining 2 were sold at a mark-down price of 25% based on selling price, find the :
a) Original selling price per player
b) Selling price of the 2 players sold at 25% mark-down rate
c) Total sales from the dozen DVD players
TRADE DISCOUNTS
• Reduction in the price of a merchandise granted by a manufacturer
or a wholesaler to the retailer.
• The discount can be in the form of TD (amount of trade discount) or
TDR (trade discount rate in percent)
• Trade discounts is offered by the manufacturers or wholesalers for
various reasons:
Adjust list prices to prevailing market prices.
Secure the trade of desirable customer.
Attract retailers to buy in large quantities.
TRADE DISCOUNTS

• To calculate simple trade discounts:

 Trade Discount (TD) = List Price (LP) x Trade Discount Rate
 Net price (NP) = List Price (LP) – Trade Discount (TD)
•  
 Net price (NP) = list price (LP) x Net price rate
 Trade discount rate (TDR) =
• If a businessman buy’s a box of canned goods listed at P 680.00 with a
trade discount of 25%, how much will be the net price?
• TD = LP x TDR
= P 680.00 x .25
= P 170.00
NP = LP – TD
= P 680 – 170
= P 510.00
Solution 2:
NP = LP x NPR
= P 680 x ( 100% - 25%)
= P 680 x 75%
= P 510.00
TRADE DISCOUNTS SERIES
• Method of granting two or more trade discounts to the
retailer.
• Also known as successive trade discounts, chain or multiple
discounts.
•  
• First discount is based on list price; the second, on the
remainder after deducting the first discount; and so on.
 NP(k for successive discount rates)=LP
• If a DVD player has a list price of P 3,400 and trade discounts of
20% and 10%, how much is then a) net price, and b) trade
discount?
a. NP = LP
•  
= P 3,400 ( 1 - 0.20) (1 – 0.10)
= P 3,400 (0.80) (0.90)
= P 2,448.00
b. TD = LP - NP
= P 3,400 – 2,448
= P 952
SINGLE EQUIVALENT TRADE DISCOUNTS RATE
• Easy way of dealing with successive trade discount rates is
to combine the rates into a single equivalent discount rate
(SETDR).
• Can be done by subtracting each trade discount rate from
100%; then multiplying the results together to obtain the
•  
overall net price rate (NPR).
• Overall net price rate is subtracted from 100% or 1, the
result is the overall trade discount rate.
 SETDR = [1 - x 100%
• A certain item is subject to 20% and 10% trade discounts. Find
the single equivalent trade discount rate.
 Given: = 20%
= 10%
•   SETDR = [1 - ]x 100%
= [1 - ( 1 - 0.20) (1 – 0.10)] x 100%
= [1 - ( 0.80) (0.90)] x 100%
= ( 1 – 0.72) x 100%
= 28%
CASH DISCOUNT

• An amount or a percentage of the net price that is deducted

from the net price if the bill is paid on or before a specified
time period called the discount period.
• Example:
•  
 A 2% cash discount is deducted from the total amount of the
merchandise if the payment is made during the 10-day discount
period. The n/30 in indicates that the total amount must be paid
within 30 days. A later payment charge of approximately 1% is
usually added to the bill if not paid on due date.
CASH DISCOUNT
• Example:
 This means that 5% may be deducted from the bill if paid within 10 days of the
discount period; 2% if paid from the from 11 th to the 20th day; or if not, full
payment of the goods is due from the 21st to the 30th day of the date of invoice.
 The buyer will receive a 3% cash discount if the bill is paid within 7 days of the
next month.
•  
 This means that the buyer will receive a 3% discount if the bill is paid within 7
days of the next month; or if not , the bill would have to be paid in full from 8 th
to the 30th day of the next month.
This means that the discount period begins upon the receipt of the goods by
the buyer.
CASH DISCOUNT
• Example:
 r cash on delivery. Payment would have to be made upon delivery of the goods.
Sample Problems:
Invoice Date Payment Term
a. January 5 10 e.o.m.

•  b. August 1 30 days

c. March 2
d. October 27 15 e.o.m.
d. October 27 15 e.o.m.
e. April 27 c.o.d
e. April 27 c.o.d
f. March 10
f. March 10
g. January 5 10 + 30x
h. May 7 5
g. January 10 +r.o.g.
10 30x
h. May 7 10 r.o.g.
CASH DISCOUNT
a. The payment for the invoice dated January 5 is due on
February 10.
b. The August 1 payment invoice is due on August 31.
c. For the March 2 invoice , 5% discount will be granted on
or before March 12; and if not paid, full payment is due
on April 1.
d. The invoice dated October 27 is late of the month. Hence,
the payment due date would be the 15th of the second
upcoming month which is December 15.
CASH DISCOUNT
e. For the April 12 invoice, payment due date is upon delivery of
the merchandise.
f. An 8% discount will be granted on the March 10 invoice if paid
on or before April 10; no discount is granted if paid from April 11
to the 60th day from the date of the invoice.
g. For the January 5 invoice , the payment due date is February 14
which is 40 days ( 10 + 30x means 10 days plus an extension of
30 days) after the date of the invoice.
h. For the May 7 invoice, the payment due date is 10 days after the
receipt of the goods. If the merchandise is received on May 15,
then the payment due date is May 25.
1. The list price of a box of bar soap is P 1,250.00. If the retailer buys the box at P
937.5, calculate the a) trade discount, and b) trade discount rate.
2. Ms. C. Navarro bought a flat television set with a listed price of P 14,600 subject
to 15%, 10%, and 5% trade discounts. How much did she pay?
3. A calculator has a list price of P 845 subject to 20%, 10%, 5% trade discounts.
Find the:
a) Single Equivalent Trade Discount Rate
b) Net price
•  
c) Trade discount
4. The list price of an electric fan is P 894 subject to 20% trade discount. What
additional trade discount rate should be given to bring down the price to P
607.92?
5. The total bill of an invoice dated March 12, 2019 is P15,225. If the bill has a
term of and is paid on March 24, find the amount of cash discount and the
amount due.