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Review. Return on Investment is a calculation that is used to determine the relative profitability of a product Profit / Investment = Return on Investment Break Even Point is the point at which sales revenue equals the costs and expenses of making and distributing.

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Review

Review

  • Return on Investment is a calculation that is used to determine the relative profitability of a product

    • Profit / Investment = Return on Investment

  • Break Even Point is the point at which sales revenue equals the costs and expenses of making and distributing.

    • Price sold at / Cost of making and marking = Break Even


Pricing math

Pricing math


Because everyone takes to long to take notes

Because Everyone takes to long to take notes.

  • (P) – Price

  • (D)% - Discount Percent

  • (D)$ - Discount Dollars

  • (NP) – Net Price

  • (SP) – Sales Price

  • (C) - Cost

  • (MM)$ - Maintained Markup Dollar

  • (MM)% - Maintained Markup Percentage

  • (MD)$ - Markdown Dollar

  • (MD)% - Markdown Percentage

  • (MU)$ - Markup Dollar

  • (MU)% - Markup Percentage


Profit vs markup

Profit vs.Markup

  • Basic Markup Calculations

    • Cost (C) + Markup (MU) = Retail (RP)

    • Retail Price (RP) – Markup (MU) = Cost (C)

    • Retail price (RP) – Cost (C) = Markup (MU)


Percentage markup

Percentage Markup

  • Determine the dollar markup

    • RP – C = MU$

  • Change the dollar markup to the percentage markup, divide it by the retail price. Result will be a decimal

    • MU$/RP = MU%

  • Change the decimal to a percentage

    • .40 = 40%


Markup equivalent table

Markup Equivalent table

  • On page 487


Calculations for lowing prices

Calculations for lowing prices

  • Markdowns – Reduce the quantity of goods in stock, a business will sometimes mark down merchandise by a certain percentage.

    • Retail Price (RP) x Markdown % = (MD)$

    • Retail Price (RP) – Markdown$ = Sales Price (SP)


Calculations for lowing prices1

Calculations for lowing prices

  • Maintained Markup – Different between an item’s final sale price and its cost.

    • Retail Price (RP) – Markdown$ = Sales Price (SP)

    • Maintained Markup

    • SP – C = Maintained Markup (MM)$

    • Determine the maintained markup percentage

    • (MM) $ Divided by SP = (MM)%


Discounts

discounts

  • Discount is a reduction in the price of good and services sold to customers.

    • Multiply the price by the discount percentage to get the dollar amount of the discount

    • (P) x (D)% = (D)$

    • Subtract the discount from the price to get the net price

    • (P) – (D)$ = NP


Discounts1

Discounts

  • Cash Discounts is a discount offered to buyers to encourage them to pay their bills quickly

    • Determine the dollar discount

    • (P) x (D)% = (D)$

    • Determine the net price

    • (P) – (D)$ = (NP)


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