How to Calculate Markup, Discount, and Tax?
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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 \(= 75 \times 0.105 \ = \ 7.875\)
Percent of Change Practice Quiz
