In mathematics the concept of cost price and selling price are studied. These are very important not only in mathematics but also in the field of business. Both the cost price and the selling price will help in determining the profit for the business. Cost price is the price that is incurred in producing the product and the selling price is the price at which the product is sold. There should be a difference between the two.
Basically the selling price must be greater than the cost price in order to earn a profit otherwise the business cannot run forward and it has to be shut down. So, one has to be very careful in fixing the selling price of the product otherwise the business might run into losses and must be closed down. The markup definition can be got from the concepts of the cost price and the selling price. Once both these concepts are clear. Then the concept is easy to understand.
So, basically it is nothing but part of the selling price. This is added to the cost price in order to find the selling price. This is done in order to get profit for the business. If markup is not added then no profit can be obtained.
Profit is the main motive for any business. No business can move forward without the help of profit. The percentage value can also be calculated for the same. For this purpose the cost price is used. The cost price comes in the denominator in the calculation.
The final answer is multiplied with ‘100’. Multiplication with ‘100’ is done to obtain the figure in percentage. In retail markup also the same concept is used. The retail price is decided in a manner so that the component of profit is always present in the selling price. The retailer cannot sell the product with losses incurred. Otherwise the retailer has to shut shop.
To calculate markup both the cost price and the selling price is required. This is calculated by subtracting the cost price from the selling price. In this case the selling price must be greater than the cost price.
This is because the profit component is also included in the total price. The total price in this case is nothing but the selling price of the product. Once mark-up is calculated it helps in knowing the margin that is required in finding selling price.