Buying and Selling

Cost Price – price that a company or store has to pay for the goods it is going to sell.
- price that has to be spent to produce goods on services before any profit is added.
- Computed on per unit basis
Operating Cost – the price (per unit) incurred relative to the production and sale of the
commodity.
Selling Price – price at which the commodity is sold per unit.
Profit – money earned after the cost price and the operating cost are accounted after the sale
of commodity.

S- Selling Price C-Cost Price E-Operating Expenses(Cost) P-Profit

Selling Price = Cost Price + Operating Cost + Profit

Markup (Margin or Gross Profit) – difference between the Selling Price and Cost Price.

Markup = Selling Price – Cost Price (MU = S – C)

Markup = Expenses + Profits (MU = E + P)
Selling Price = Cost + Markup (SP = C + MU)

Example:
Aling Ana would like to sell little trinkets. She purchased from Divisoria for P12 each. If the operating cost is set at 25% of the cost
and she would like to have a 15% profit on the cost of each item.
a. Determine the mark-up price for each trinket.
MU= (25% * 12)+(15%*12)
=3+1.8
=4.8
b. Help Aling Ana determine the selling price of each trinket.
SP= C + MU
=P12+P4.8
=P16.80

Julia buys a notebook with a cost of P45. The rate of mark-up on cost 25%. Find the selling price and mark-up.
MU=25% * 45 SP=45+11.25
=P11.25 =P56.25

A top costs Mang Mario P280 and he decides to mark it up by 30% of the selling price. Find the selling price and mark-up of the said
top.
MU=280*30% SP=280+84
=P84 =P364

Rate of Markup based on cost: Rate of Markup based on selling price:

𝑴𝒂𝒓𝒌𝒖𝒑 𝑴𝒂𝒓𝒌𝒖𝒑
𝑴𝒄(%) = 𝑪𝒐𝒔𝒕 (𝟏𝟎𝟎) 𝑴𝒔(%) = 𝑺𝒆𝒍𝒍𝒊𝒏𝒈 𝑷𝒓𝒊𝒄𝒆 (𝟏𝟎𝟎)

S-Selling Price Po-Original Price Md-Markdown Rate M-Mark-up Rate

𝑺
S=Po(1-Md) Md= 1-𝑷𝒐
𝑺
Po= Markdown Formulas
𝟏−𝑴𝒅
 𝑺
S=Po(1+M) M=𝟏 + 𝑷
𝑺
Po=𝟏+𝑴 Mark-up Formulas

Example:
A bookstore priced a textbook at P650 using a mark-up of 40% of cost. What was the original cost of the book? What percent of
selling price is the mark-up?
SP=P650 M=0.40 Po=? Ms(%)=?
Po=S/(1+M) Ms=(Po)(M) Ms(%)=(Mark-up/SP)(100)
=P650/(1+0.40) =(P464.29)(0.40) =(P185.72/P650)(100)
=P650/1.4 =P185.72 =28.57%
=P464.29

An appliance center sells washing machine at a mark-up of 15% of the selling price. The store’s mark-up on a certain model is P300.
Ms(%)=15% M=P300
a. What is the selling price of the washing machine?
Ms(%)=M/S (100)
15%=P300/S
S=P300/0.15
=P2000

b. What is the original cost of the washing machine?

S=C+M
2000=C+300
2000-300=C
1700=C
c. What is the rate of the mark-up based on cost?
Mc(%)=M/C (100)
=300/1700 (100)
=17.65%

Trade Discount – the amount by which a price of a product is reduced by the manufacturer
when it is sold.
List Price – fee for a service or product before discounts are deducted or sales taxes are added.
Net Price – final charge you pay for a product or service after discounts and sales taxes are
computed.

Trade Discount = Original Price * Discount Rate

List Price /Selling Price = Discounted Price + Trade Discount
Discounted Price/Net Price = List Price/Selling Price - Trade Discount

Trade Series Discount – a type of discount in which several discounts are given to a customer at different times and different conditions.
-are given to customers in order to encourage them to purchase in volume. It is also effective in promoting seasonal items and to
entire new set
of customers.

Discount Series (%) = [𝟏 − (𝟏 − 𝒅𝟏)(𝟏 − 𝒅𝟐)(𝟏 − 𝒅𝟑)]

Net Price = (1-d1)(1-d2)(1-d3)OP

Profit = Net Sales – Cost

*The difference between what a merchant invest into business and what he receives in return is called PROFIT.

Net Sales – the amount of money received from selling goods and costs the amount paid for the goods.
*However, there are cases in which Net Sales of goods is less than cost; Such difference is called LOSS.
Loss= Cost – Net Sales

*In this case, when Net Sales is equal to cost, we call such situation as BREAK EVEN.

Principal – the amount of money, which was borrowed from the lender (bank, cooperative, lending, inst., etc.)
Interest – the change for the privilege of borrowing money.
Loan term/ Interest Period – the period of time, where the lender or creditor interest starting from loan date up to the loan repayment.

*to compute for the Simple Interest:

I=PRT P=Principal R=Annual Interest Rate T=Interest Period/Loan Term

The Maturity Value (M) that the lender receives from the depositor on the maturity date of the loan is equal to the sum of the
principal (P) and the Simple Interest (I).
M=P+I M=P+PRT or M=P(1+RT)

*Ordinary Interest
𝑹 𝑰 𝑰 𝑰
I=𝑷 ∙ 𝟑𝟔𝟎 ∙ 𝑻 R=𝑷𝑻 (𝟑𝟔𝟎) T=𝑷𝑹 (𝟑𝟔𝟎) P=𝑹𝑻 (𝟑𝟔𝟎)
*Exact Interest
𝑹 𝑰 𝑰 𝑰
I=𝑷 ∙ 𝟑𝟔𝟓 ∙ 𝑻 R=𝑷𝑻 (𝟑𝟔𝟓) T=𝑷𝑹 (𝟑𝟔𝟓) P=𝑹𝑻 (𝟑𝟔𝟓)

Commission – is a fee that a business pays to a salesperson in exchange for his services in either facilitating, supervising, or completing a
sale.

3 Different Types of Commission:

1. Straight Commission
-based on percentage of sales only
2. Salary Graduated Commission
-varies according to how much sales is made
3. Salary Plus Commission
-a salesperson gets his basic salary and a percentage of whatever sales he makes

Gross Earnings – the amount earned by any person before subtracting the taxes, benefits, loans, and other possible deductions.
Net Earnings – amount earned by any person from the gross earnings less the total deductions.
Deduction – amount geld by any authority as a form of payment for some necessary dues.
Salary – a fixed regular payment, typically paid on monthly or biweekly basis but often expressed as an annual sum

E=D + N N=E – D D= E - N