## How to Calculate Markup, Discount, and Tax

Read,5 minutes

### What is Markup?

The term "markup" describes the **difference** between an item's **cost** and its **selling price**. It is stated as an **additional** percentage over the price. In other words, the seller charges a premium **over** the overall cost of the good or service.

### The Formula for Markup Percentage

The markup percentage calculation formula is:

\(Markup \ Percentage \ = \ \frac{Selling \ Price \ - \ Cost}{Cost} \times 100\)

For example, if a product costs \($20\) and sells for \($25\), the markup percentage is:

\(\frac{25 \ - \ 20}{20} \times 100 \ = \ 0.25 \times 100 \ = \ 25\)\(\%\)

### What is Discount?

There are many reasons why businesses give discounts to customers. A business might want to attract a **new** type of customer or raise **demand** for a particular good or service.

### How to Determine Discount

Calculating a discount is a **simple** process. The steps are as follows:

**Step1:**First, change the percent into a**decimal**: Give a decimal representation of the discount percentage.**Step2:**Multiply the decimal to the original cost:**Multiply**the decimal calculated in step one by the**original**price of the item.**Step3:**Subtract the discount from the original cost: Take the discounted dollar number from step two and**subtract**it from the original price

### Example

Walmart wants to cut the price of women's shoes by \(15\)\(\%\). women's shoes cost \($50\) at first. What is the discounted cost of women's shoes?

**Step1:**In decimal form, \(15\)\(\%\) is written as \(0.15\).**Step2:**Multiplying \($50\) by \(15\)\(\%\): \($50 \times 0.15 \ = \ $7.5\), so the price of the women's shoes has been cut by \($7.5\).**Step3:**Subtract the discount from the original cost: discounted cost of women's shoes \(= \ 50 \ - \ 7.5 \ = \ 42.5\)

### How to Calculate sales tax

Before you buy an item, it's **critical** to know the price of the item. You **can't** just look at the price tag to determine how much it costs; you also have to determine the sales tax. Use these below tips to learn how to calculate the sales tax.

### Calculating Sales Tax

- First, give a decimal representation of the sales tax.
- Next, use the sales tax calculation formula: Total Sales Tax \(=\) Item Cost \(\times\) Sales Tax

### Example

Calculate the total sales tax for a service which its cost is \($75\) and sales tax for it is \(10.5\)\(\%\).

**Solution:**

**Step1:** Convert the sales tax percentage to a decimal:

\(10.5\)\(\%\) \(= \ 0.105\)

**Step2:** Use the sales tax calculation formula:

Total Sales Tax \(= 75 \times 0.105 \ = \ 7.875\)