Section 27.1 Calculating Prices Chapter 27 pricing math Section 27.2 Calculating Discounts.

Section 27.1Calculating Prices

Chapter 27

pricing math

Section 27.2Calculating Discounts

CONNECT Why is setting a price an important part of the marketing mix?

Calculating Prices

Sec

tio

n 2

7.1

• Explain how a company’s profit is related to markup.

• Use the basic formula for calculating a retail price.

• Calculate dollar and percentage markup based on cost or retail.

• Calculate markdowns in dollars and percentages.

• Calculate maintained markup in dollars and percentages.

Sec

tio

n 2

7.1

Calculating Prices

Pricing and profit have a direct relationship to

each other. Retailers use different pricing

formulas for calculating prices, markups, and

markdowns.

Calculating Prices

Sec

tio

n 2

7.1

• gross profit

• maintained markup

Calculating Prices

Sec

tio

n 2

7.1

Calculating Prices

Identify the Formula for Calculating a Retail Price in the Middle Circle. Use Outer Circles to Note Other Formulas

Sec

tio

n 2

7.1

Calculating Prices

Profit and Markup

Sec

tio

n 2

7.1

gross profitThe difference between sales revenue and the cost of goods sold.

The markup (margin) on an item is the same as gross profit.

Calculating Prices

Profit and Markup

Sec

tio

n 2

7.1

Goals of Pricing

Calculating Prices

Profit and Markup

Sec

tio

n 2

7.1

Three Basic Ways to Perform Markup

Calculating Prices

Profit and Markup

Sec

tio

n 2

7.1

Calculate Percentage Markup on Retail

Calculating Prices

Profit and Markup

Sec

tio

n 2

7.1

Calculate Percentage Markup on Cost

Calculating Prices

Profit and Markup

Sec

tio

n 2

7.1

The Cost Methodof Pricing

Calculating Prices

Profit and Markup

Sec

tio

n 2

7.1

Convert the Markup on Retail to the Markup on Cost and Apply it to the

Cost of an Item

Calculating Prices

Profit and Markup

Sec

tio

n 2

7.1

A Second Method of Calculating the Retail

Price from the Cost and the Markup on Retail

Calculating Prices

Calculations for Lowering Prices

Sec

tio

n 2

7.1

Lowering Prices

Calculating Prices


Sec

tio

n 2

7.1

maintained markupThe difference between an item’s final sale price and its cost.

What is maintained markup?

Calculating Prices


Sec

tio

n 2

7.1

Steps to Determining

Maintained Markup

Calculating Prices

Discuss why retailers prefer to use markup percent based on the retail price instead of the markup percent on cost.

Section 27.1

1.

Retailers prefer markup percent based on retail price because the markup on retail price sounds like a smaller amount and makes the price seem more reasonable to the consumer. Future markdowns and discounts are calculated on a retail basis. Profits are generally calculated on sales revenue.

Sec

tio

n 2

7.1

Calculating Prices

Identify when the markup equivalents chart is used to calculate retail prices.

Section 27.1

2.

The markup equivalents chart is used to calculate retail prices when you know the cost and you know the percent of markup you want based on retail price.

Sec

tio

n 2

7.1

Calculating Prices

Explain when the initial markup is the same as the maintained markup.

Section 27.1

3.

When no markdowns are taken, the initial markup and maintained markup are the same.

Sec

tio

n 2

7.1

CONNECT What was the last discounted item you purchased?

Calculating Discounts

Sec

tio

n 2

7.2

• Utilize a general procedure for figuring discounts and net prices.

• Calculate discounts in dollars and percentages.

• Calculate net amount.

Sec

tio

n 2

7.2


Discounts affect the final price a customer will

pay. It is essential to learn how to calculate

discounts and the net price payable.


Sec

tio

n 2

7.2

• employee discounts


Sec

tio

n 2

7.2


Procedures for Calculating Discounts, the Net Amount Payable, and Examples of Discounts Offered by

Employers and Vendors

Sec

tio

n 2

7.2


Sec

tio

n 2

7.2

Discounts

How to Calculate a Discount in Dollars Along with an Item’s Net Price


Sec

tio

n 2

7.2

Discounts

employee discountA discount offered to workers by their employers.

Employee discounts can range from 10 percent to 30 percent for

entry-level employees.


Sec

tio

n 2

7.2

Discounts

Types of Discounts


Sec

tio

n 2

7.2

Discounts

How to Calculate a Trade Discount Based on a Series


Sec

tio

n 2

7.2

Discounts

Quantity Discounts

No. of items 1–24 25–48 49–72

Unit Price $0.95 $0.90 $0.85


Sec

tio

n 2

7.2

Discounts

Promotional DiscountsSTEP 1 Divide the dollar discount by the original price. The answer will be a decimal.

STEP 2 Change the decimal to a percentage by shifting the decimal point two places to the right. This figure is the percentage discount. When necessary, round the percentage to the tenths place.

.025 = 2.5% D($) divided by P = D(%) $250 ÷ $10,000 = .025


Sec

tio

n 2

7.2

Discounts

Potential Pitfalls of Discount Pricing

Frequent sales can numb customer response.

Some businesses have to offer very deep discounts to see an increase in traffic.

Price promotions may set a precedent.

Poorly planned discounts can lead to price wars.


Explain why employers offer employee discounts.

Section 27.2

1.

Offering discounts encourages employees to buy and use the products in the hope that they will then project confidence in the products and enthusiasm when selling those products.

Sec

tio

n 2

7.2


Identify what the number “3” represents in invoice terms 3/10, net 45.

Section 27.2

2.

The number “3” indicates that the buyer will receive a 3 percent discount if the invoice is paid within 10 days.

Sec

tio

n 2

7.2


Discuss why vendors offer seasonal discounts.

Section 27.2

3.

Vendors offer seasonal discounts to encourage buyers to purchase goods long before the consumer buying season.

Sec

tio

n 2

7.2

End of

Section 27.1Calculating Prices

Chapter 27

pricing math

Section 27.2Calculating Discounts

Section 27.1 Calculating Prices Chapter 27 pricing math Section 27.2 Calculating Discounts.

Documents

Transcript of Section 27.1 Calculating Prices Chapter 27 pricing math Section 27.2 Calculating Discounts.