Personal Finance: Background You’ll Need 2

Lumen Learning

Personal Finance: Background You’ll Need 2

Calculate mark up of a product

Calculating Mark-up

Applications of mark-up are very common in retail settings. The price a retailer pays for an item is called the wholesale price. The retailer then adds a mark-up to the wholesale price to get the list price, the price he sells the item for. The mark-up is usually calculated as a percent of the wholesale price. The percent is called the mark-up rate. To determine the amount of mark-up, multiply the mark-up rate by the wholesale price.

mark-up

The mark-up is the amount added to the wholesale price.

[latex]\begin{array}{ccc}\hfill \text{amount of mark-up}& =& \text{mark-up rate}\cdot \text{wholesale price}\hfill \\ \hfill \text{list price}& =& \text{wholesale price}+\text{mark up}\hfill \end{array}[/latex]

The list price should always be more than the wholesale price.

How To: Calculate List Price from Wholesale Price and Mark-Up

Understand the Terms
1. Wholesale Price: The initial cost of the item before any mark-up.
2. Mark-Up Rate: The percentage the wholesale price is increased by to determine the list price.
3. Amount of Mark-Up: The actual dollar amount that the wholesale price is increased by.
4. List Price: The final price of the item after the mark-up is applied.
Calculate the Amount of Mark-Up: Convert the mark-up rate from a percentage to a decimal by dividing by [latex]100[/latex]. Multiply the wholesale price by the decimal mark-up rate.
Calculate the List Price: Add the amount of mark-up to the wholesale price.

Adam’s art gallery bought a photograph at the wholesale price of [latex]\text{\$250}[/latex]. Adam marked the price up [latex]\text{40%}[/latex].

Find the amount of mark-up.
Find the list price of the photograph.

Identify what you are asked to find.	What is the amount of mark-up?
Choose a variable to represent it.	Let [latex]m=[/latex] the amount of each mark-up.
Write a sentence that gives the information to find it.	The mark-up is [latex]40\text{%}[/latex] of the wholesale price.
Translate into an equation.
Simplify.	[latex]m=100[/latex]
Check if this answer is reasonable.	Yes. The markup rate is less than [latex]50\text{%}[/latex] and [latex]\text{\$100}[/latex] is less than half of [latex]\text{\$250}[/latex].
Write a complete sentence that answers the question.	The mark-up on the photograph was [latex]\text{\$100}[/latex].

Identify what you are asked to find.	What is the list price?
Choose a variable to represent it.	Let [latex]p=[/latex] the list price.
Write a sentence that gives the information to find it.	The list price is the wholesale price plus the mark-up.
Translate into an equation.
Simplify.	[latex]p=350[/latex]
Check if this answer is reasonable.	Yes. The list price, [latex]\text{\$350}[/latex], is more than the wholesale price, [latex]\text{\$250}[/latex].
Write a complete sentence that answers the question.	The list price of the photograph was [latex]\text{\$350}[/latex].