Question

For this week’s discussion board, we hope to understand the relationships that exist in the equations above.For your initial post, consider the first equation: Cost + Markup = Selling Price. Why is this an important equation for businesses that sell products? Next, rearrange the equation to solve for ‘Markup.’ In other words, ‘Markup = …’. What is that equation saying about Markup? How is ‘Markup’ related to the other two quantities?For your first reply post, reply to your own post and consider the second equation. What happens to the markup price as the ‘Number of Units Sold’ changes (goes up/goes down)? Explain your thinking and provide an example if it’s helpful.For your second reply post, reply to a peer’s post and critique their thinking. Could they have explained something better? Is there something you can add to their post to make it more complete? If you cannot add to and improve their post, talk about what you liked most.

Answer 1

When you sell an item, you don’t charge the same amount you paid for it. You mark it up to make a profit. Markup is the difference between how much you spent on an item vs. how much more you’re selling it for. The greater the markup, the more you keep as profit once you sell the products. Wholesale businesses and retailers use markup to set product prices. Markup is expressed as a percentage.

Many business owners can’t help but think about margin when talking about markup. You can use both markup and margin to determine prices and measure a product’s profitability. Like markup, margin is expressed as a percentage.

Again, markup shows the difference between selling price and product cost. On the other hand, margin shows the percentage of revenue you earn per product.

You need to know how to calculate markup if you want to do strategic pricing. Strategic pricing helps you to set an attractive price to maximize your profit

`\text{Markup}=\text{Selling Price - Cost}`

For your first reply post:

To come up with a markup percentage, use the markup formula … which we’ll get into soon. But before you can calculate markup, you need to know a few basic accounting terms:

Revenue: Income you earn by selling products.

Cost of Goods Sold (COGS): Expenses that go into making your products (e.g., materials and direct labor costs).

Gross Profit: The difference between revenue and COGS.

For your second reply post:

The mark up for the prices of goods sold goes up / down :

here are many factors a business owner should consider when pricing a product using markup and breakeven analysis. These three may be the most important:

.The cost of production

.The market demand for the product

.The desired markup by the business owner