If you are wondering what is the difference between discounts and markup then you have come the right way? Here we will give you insight on discount and markups definition, formulae, and solved examples explaining step by step on how to approach. Follow the concept and know the real-time examples of discount and markup by checking the below sections for detailed information.
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What is meant by Discount?
Discount is the reduction in the price/rate of some product/item. The main purposes of providing discounts are:
- Increase in sales
- Clear the old stock
- Encourage distributors
- Reward potential customers
Discount is considered the easiest way to increase the product demand and plays an important role in online products. We can check amazing offers while shopping for various products. These offers mainly concentrate to attract customers which are named as discounts. It is considered as the value/price of the total amount/quantity which is generally less than the original value. In general words, we can tell that the total amount is sold at a particular discount to attract customers.
Discount Formula
The discount formula is as follows:
Discount = Marked Price – Selling Price
where Marked Price (M.P) is the actual value of the product without the discount value.
Selling Price is what the customers pay for the product.
Discount is the percentage of the marked price.
Markup
Markup is considered as the total profit or gross on a particular service or commodity. It is defined as the percentage over cost price. For suppose, if the product cost is Rs. 100 and its selling price is Rs. 150, then the markup will be 50%. It is also defined as the difference between CP(cost price) and SP(selling price) of the product. It estimates the profit and loss of the business.
What is meant by Markup Price?
Markup is the difference between the retail price of a commodity and cost. The amount that is added to the cost determines the retail prices of particular items. Markup is combined with total C.P to meet the business costs and generation of profit. Markup represents the percentage or fixed amount of selling price or cost price.
Markup Formula
As mentioned above, markup value is the difference between the SP(selling price) and CP(cost price) of the product.
Markup = Retail – Cost
Markup Percentage
The formula to calculate the markup percentage is:
Sale Price = Cost * (1 + Markup) or Markup = 100 * (Sale Price – Cost Price)/Cost
Markup and Discount Examples
Example 1.
Lara wanted to gift her mom a dress. The cost of the dress was Rs. 450 and it is marked as 20% off on the dress. How much is the discount amount?
Solution:
Given that, Cost of the dress = Rs. 450
Discount Percentage = 20%
Discount Amount = Original Price * Discount Rate
Discount Amount = 450 * 20% = 450 * (20/100) = 90
Therefore, the discount amount is Rs. 90
Hence the final cost of the dress is Cost Price – Discount Amount
= 450 – 90 = 340
The final cost is 340.
Example 2.
Soheal bought a watch which was originally Rs. 5000. He got a discount of 50% on the total amount. How much is the discount amount?
Solution:
Given that, the cost of the watch = Rs. 5000
Discount he got = 50%
Discount Amount = Original Price * Discount Rate
Discount Amount = 5000 * 50%
= 5000 * (50/100)
= 2500
Therefore, the discount amount is 2500
Hence the final cost of the watch is Cost Price – Discount Amount
= 5000 – 2500
= 2500
The final cost of the watch is 2500.
Example 3.
The original price of the book is Rs. 400. I got 20% on the total amount. How much is the discount amount?
Solution:
Given that, the cost of the book is Rs. 400
The discount I got = 20%
Discount Amount = Original Price * Discount Rate
Discount Amount = 400 * 20% = 400 * (20/100) = 80
Therefore, the discount amount is Rs. 80
Hence the final cost of the book is Cost Price – Discount Amount
= 400 – 80 = 320
The final cost of the book is Rs. 320
Example 4.
A car dealer advertises a 7% markup over cost. Find the selling price of the car that cost the dealer $13,000.
Solution:
Given that, Markup = 7% of 13,000 = (7/100) * 13000 = 910
The markup price is 910
Selling Price = Cost Price + Markup Price
=13,000 + 900
=13,900
The selling price of car = 13,900
Example 5.
A ring that costs the jeweler $360 sells for $630. Find the markup rate?
Solution:
Given that, Cost of the ring = $360
Selling Price = $630
Markup Price = Selling Price – Cost Price
= 630 – 360 = 270
The markup price = $270
Markup Percentage = Markup Price / Cost Price
= 270/360 = 75%
Therefore, the markup percentage = 75%
Example 6.
A person got a loan from a bank at a rate of 3% per year for some period. In how much period of time his loan of Rs. 65,000 will become Rs. 68,000.
Solution:
Given that, Principal amount = Rs. 65,000
Profit for bank = Rs. 68,000 – 65000 = 3900
Markup rate = 3/100per year
Profit per year = 650 * 3 = Rs. 1,950
The total amount of time period to clear a loan is 3900 – 1950 = 1950
Therefore, it takes 2 years to become Rs. 68,000 from Rs. 65,000 is 2 years.
Hence, the complete information is given on discount and markup. Check our page for more new concepts and information. Discount and Markup are used in day-to-day life and solve various problems of business.