Unit 8: Markon on the Selling Price and on the Cost

Performance Objectives

After completing Unit 8, you will be able to:

• Define markon.

• Compute markon on the selling price, given the selling price and percent of markon.

• Compute markon on the selling price, given the cost and percent of markon.

• Compute the markon on cost, given the cost and percent of markon.

• Compute the percent of markon on the cost and on the selling price.



MARKON
The difference between the selling price and the cost of an article is known as markon. For convenience in reading, SP will be used for the selling price and markon % will be used for percent of markon. The markon formula is:
Markon = SP – Cost
1. What does SP mean? _______(a)_______  Should you read SP as selling price?_____(b)_____

2. "Markon %" is a short expression for what phrase? ____________

3. The Music Shop sells single records for $5.95 that cost $4.39. The difference of $1.56 is called ____________________.

4. The difference between the cost and the SP of an article is called ___________.

5. The sum of the markon and the cost equals _________.

6. The difference between SP and markon is __________________.

7. The markon for record albums that cost $14.50 and sell for $20.90 is _________.

8. What is the abbreviation for selling price? ___(a)____  What is a short expression for "percent of markon"? _______(b)_______

9. If the SP is $72.40 and markon is $16.25, the cost is ___________________.

COMPUTING MARKON ON THE SP, GIVEN THE SP AND THE MARKON % When the SP and the markon % are given, the formula for computing markon is:

Markon = Markon % x SP
Example: Assume that an item sells for $6 and the markon is to be 30% of SP.

                    Then markon = 0.3 x $6 = $1.80.

10. If a record album has a SP of $8.50 and the markon is 30% on the SP, what is the amount of the markon? __________________

11. It is common practice for many businesses to compute their percent of profit on sales. Would you expect it to be common for them to compute their markon as a percent of the SP? ____________

12. If the markon is 25% on the SP, then the markon on an article selling for $3 is ____(a)___. For a $5 article the markon is _____(b)______.

13. Whether markon % is based on the cost or on the SP, the difference between the cost and the SP is still known as ____________________.

THE PERCENT OF MARKON
Sometimes business owners want to know the markon % on SP. It is computed as follows.

 
Markon %  – Markon
SP
For example, if the SP of an item is $25 and the markon is $5, then the markon % on the SP = 5/25  = 20%.

14. If the SP of an item is $75 and markon is $18, then the markon % on the SP is ________.

15. A pair of shoes that cost $27.65 sells for $39.50. What is the markon? _____(a)____ What is the markon % on the SP? _______(b)_______

PROPORTIONS AS A PROBLEM-SOLVING TOOL FOR MARKON
The following brief review of proportions from Book 1 will make the next problems easier to solve. Proportions are composed of two equal ratios. A ratio contains two related quantities in fraction form.

Problem: If 95% of something is $50, what is 100% of it? Let S be the unknown.

Step 1: Set up a ratio for "95% of the unknown represents $50." 95% / $50

Step 2: Set up another ratio for "100% represents the unknown, S." 100% / S

Step 3: Set up a proportion, making the two ratios equal to one another.

Step 4: Cross multiply. 

Step 5: Solve the resulting equation. 0.95 x S = 50
                                                                  S = 50 / 0.95 = $52.63

16. Set up a proportion to solve each problem.
(a) If 75% of something is $2.25, what is 100% of it? ____________________

(b) If 80% of something is $4.40, what is 100% of it? ___________________

(c) If 65% of something is $15.50, what is 100% of it? ___________________

(d) Compute 100% of something, if $84 is 78% of it. __________________

(e) Compute 100% of something, if $150 is 50% of it. __________________

COMPUTING THE SP, GIVEN THE COST AND MARKON % ON SP
It is easy to compute the markon on SP, when you know the SP and the markon %. But what if you do not know the SP and know only the cost and the markon % on the SP?

Example: Suppose a handheld calculator cost $7.50 and the markon is 25% on the SP. What do you do with the 25%? You cannot multiply 25% times $7.50, because markon is to be based on the SP. You cannot multiply 25% times the SP, because SP is what you want to find out. The following problems will teach you how to solve this kind of problem.

17. If you are given the cost of an article and the markon % on the SP, can you multiply the markon % times the cost to find the amount of markon? ____(a)____

Can you multiply the markon % times the SP? ____(b)_____

Why or why not? ________________________(c)_______________

Problem: Compute the SP and the markon if you are told that markon is to be 25% of the SP and the cost is $7.50.

Problem Analysis: List all the knowns and the unknown. Study the pie chart below to help you analyze the problem.

18. What does the whole pie represent? ____(a)____  What percent? _____(b)_____

19. What percent of the pie is given as markon? _____(a)_____

What percent of the pie is then the cost? Use 100% and 25% to compute the percent the cost is of the SP (cost %). This is an important step. _____(b)_____

20. What is the cost of the item in dollars? ______(a)______

What are you asked to compute? ____(b)____.

21. Let’s solve the problem you have just analyzed. Here it is again: Compute the SP and the markon if you are told that markon is to be 25% of the SP and the cost is $7.50.

(1) List the knowns:

(a) What is the cost? ____________________

(b) What is the SP % (the whole pie)? ________

(c) What is the markon %? ________

(d) What must be the cost %? ________

(2) What is unknown? _______(e)_______

(3) Set up a proportion of two equal ratios.

_______(f)_______
Note that both percents must be either at the top or the bottom of the ratios. You cannot have one at the top and one at the bottom.

(4) Cross multiply.

_______(g)_________

(5) Solve the resulting equation to compute the SP.  ________(h)________

(6) Subtract to compute the amount of markon. ________(i)_________

22. Review the steps for computing SP, given the cost and the markon % on SP.

(a) List the ____________________.

(b) State the ____________________.

(c) Set up a ___________________.

(d) Cross ___________________.

(e) Solve the resulting _____________ to obtain the SP,

(f) Compute the amount of the _________________.

23. The cost of a raincoat is $24 and the markon is 20% on the SP. Use the steps above to compute the SP and the markon.
(a) List the knowns (3 knowns). _________________

(b) State the unknowns. _________________

(c) Set up a proportion. __________

(d) Cross multiply. ___________

(e) Solve the equation for SP. ___________________

(f) Compute the amount of the markon. ___________

24. The cost of a microcomputer printer is $175 and the markon is 30% on the SP. Compute the SP. Compute the markon. Use the six steps given above to compute the answers.
List the knowns. ________(a)_______
                         ________(b)_______
                        _________(c)_______

State the unknowns. ______(d)_______

Set up a proportion. _____(e)_____

Cross multiply. _____(f)_____

Solve the equation for SP. _______(g)_______

Compute the amount of the markon. _____(h)_____

25. The cost of a ski jacket is $133 and the markon on the SP is 40%. Use the six steps to compute the answers.

(a) Compute the SP. _________________

(b) Compute the markon. _____________

26. If the cost is $42 and the markon on the SP is 20%, can you determine the amount of markon by computing 20% of $42?  ____(a)____

Why or why not? _____________________(b)______________________

27. If the cost is $2.50 and the markon on the SP is 16 2/3%, then the SP is ____(a)____

The markon is ______(b)_______.

28. Compute the SP and the markon for the problems below.
 
Cost
Markon on SP
Selling Price
Markon
$ 21.00
33 1/3 %
__(a)__
__(b)__
$ 7.70
12 1/2%
__(c)__
__(d)__
$ 60.00
25%
__(e)__
__(f)__
$ 38.55
45%
__(g)__
__(h)__

COMPUTING MARKON ON THE COST
Markon is sometimes computed on the cost rather than on the SP. As you will soon see, the computation is very simple, but be certain you understand the principle involved. The formula is:

Markon = Markon % x Cost
Problem: A pen and pencil set costs $15 and is to be marked up 40%. What is the amount of the markon and the SP? Study the bar chart below.
SP is unknown
29. What does the whole bar represent?  _____(a)_____

What is the 40% markon to be based on?  _____(b)_____

Should $15 be multiplied by 40%? _____(c)_____

Is the amount of the markon to be added to the cost? _____(d)_____

MODEL COMPUTATION
The computation for the problem illustrated in the bar chart is shown below. First compute the markon; then compute the SP.

Step 1: Compute markon, using the formula Markon = Markon % x Cost.

Markon = 40% x $15 = $6

Step 2: Compute SP, using the formula SP = Cost + Markon.

SP = $15 + $6 = $21

30. If the cost is $120 and the markon is 30% on the cost, then the markon is ___(a)___. The SP is _____(b)_____.

If the cost is $195 and the markon is 25% on the cost, then the markon is _____(c)_____. The SP is ______(d)_____.

31. If the cost of a T-shirt is $4.40 and the markon is 25% on the cost, the markon is
_________(a)____________.

The SP is ______(b)________

A dining table that costs $600 is to carry a markon of 25% on the cost.

The markon is ________(c)_______.
The SP is ______(d)_______.

32. Compute the markon and SP of an article that carries a markon of 25% on its cost of $62.00.

The markon is _______(a)________.
The SP is _______(b)_______.

33. Peanuts that cost $0.75 a pound and are to carry a markon of 40% on the cost.

The markon per pound is _______(a)________.
The SP per pound is _______(b)______.

34. A shipment of fertilizer is billed at a wholesale price of $4.80 a bag and is to be sold at a 12 1/2% markon on the cost price.

The markon is _______(a)______ on each bag.
The SP is ________(b)_______ on each bag.

35. Boxes of 500 envelopes cost $8.90 each and sell for $10.50 each. What is the
amount of the markon per box? __________________

36. Office handbooks are invoiced at $8.80 and are to carry a 20% markon on the SP.

The SP is _______(a)________.
The markon is ______(b)_______.

37. An invoice for bath oil lists it at $2.50 a bottle. If the bath oil is to carry a 27 1/2%
markon on the SP, what is the amount of markon on each bottle? ___________

38. Sales discounts to customers, commissions to sales representatives, and markdowns on the SP are based on the SP, not on the __________________.

39. Retail sales taxes are computed on the SP, as are many other computations. Would you expect salespersons' commissions to be computed on cost or the SP of an item? ___________

40. To determine whether there is a gain or loss on the sale of an item, compute the difference between the ________(a)________ and the ______(b)______.

41. At the end of the season, beach chairs that cost $57 were sold for $45. There was a loss of ____________ on the sale of each chair.

42. Patio chairs cost $56 and sell for $80. The gain, or markon, is $24. The percent of gain, or markon, on the SP is ____________.

43. Compute the amount and the percent of gain or loss based on the SP for the following articles. The answers for the first article are completed as an example.
 
Cost
Selling Price
Amount 
(Gain or Loss)
Percent on SP 
(Gain or Loss)
$100.00
$125.00
Gain, $25.00
Gain, 20%
$2.50
$3.75
(a)
(b)
$17.00
$16.00
(c)
(d)

44. A couch selling for $820.00 cost $598.60. The amount of gain was ____(a)______ and the percent of gain on the selling price was _____(b)______.

45. Compute the amount and the percent of gain or loss based on the SP for each of the articles below. Compute answers to three decimals and then convert to percents.
 
Cost
Selling Price
Amount 
(Gain or Loss)
Percent on SP 
(Gain or Loss)
$65.00
$105.00
(a)
(b)
$420.00
$380.00
(c)
(d)

46. Complete the following formula.
SP – Markon = _________________

47. Dictionaries sell for $20, on which the gain (markon) is 20% of the SP.

What is the amount of gain?____(a)____
What is the cost? _____(b)_____

48. Compute the amount of gain or loss and the cost when the markon is based on SP.
 
Cost
Selling Price
Percent on SP 
(Gain or Loss)
Amount 
(Gain or Loss)
(a)
$125.00
Gain, 30%
(b)
(c)
$169.95
Gain, 20%
(d)
(e)
$525.00
Loss, 20%
(f)

49. Compute the amount of gain or loss and the cost based on the SP.
 
Cost
Selling Price
Percent on SP 
(Gain or Loss)
Amount 
(Gain or Loss)
(a)
$624.00
Gain, 35%
(b)
(c)
$204.00
Loss, 33 1/3%
(d)
(e)
$99.90
Gain, 16 2/3%
(f)

50. When the SP is larger than the cost, will there be a gain or a loss on the sale? ___(a)___
The formula to use is SP – Cost = _______(b)_________

51. At the Willow Company, markon is based on cost. Hedge trimmers that cost $62 carry a 30% markon on cost.

The amount of gain will be _______(a)__________.
The SP will be _______(b)_______.

52. Compute the amount of gain or loss and the SP when the markon is based on the cost.
 
Cost
Percent on SP 
(Gain or Loss)
Amount 
(Gain or Loss)
Selling Price
$86.40
Gain, 33 1/3%
(a)
(b)
$743.50
Loss, 40%
(c)
(d)
$135.00
Gain, 45%
(e)
(f)


 You have finished Unit 8. Please select one of the choices below.