9.1 Markup on Cost

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9.1 Markup on Cost

• Selling Price price for product offered to
  public
• Markup, margin, or gross profit difference
  between the cost and the selling price
• Basic formula Cost Markup Selling Price(in
  this section markup is based on cost)

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9.1 Markup on Cost

• Example A coffee maker is purchased for 15 and
  sold for 18.75. Find the percent of markup based
  on cost.Markup M 18.75 - 15
  3.75Percent equation P partB baseR
  rate percent

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9.1 Markup on Cost

• Example A baseball glove is sold for 42, which
  is 140 of cost. How much is the stores
  cost?Selling price 140 of cost so the markup
  is 40 of cost (cost is 100 of itself)

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9.1 Markup on Cost

• Example North American Coins priced a proof coin
  at 868, which was 112 of cost. Find (a) the
  cost, (b) the markup as a percent of cost, and
  (c) the markup.Selling price 112 of cost so
  the markup is 12 of cost

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9.2 Markup on Selling Price

• Sometimes markup is based on the selling price
  rather than cost. The same basic formula
  applies
• The difference is that markup is now considered a
  percent of the selling price rather than cost

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9.2 Markup on Selling Price

• Example An auto parts dealer pays 7.14 per 12
  gallons of windshield washer fluid and the markup
  is 50 on selling price. Find the selling
  price.Markup 50 of the selling price

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9.2 Markup on Selling Price

• Example A retailer purchases silk flowers for
  31.56 per dozen and sells them for 4.78 each.
  Find the percent markup on selling price and the
  equivalent percent markup on cost.

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9.2 Markup on Selling Price

• Converting percent markup on cost to percent
  markup on selling price
• Converting percent markup on selling price to
  percent markup on cost

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9.2 Markup on Selling Price

• Example Convert a markup of 20 on selling price
  to its equivalent markup on cost.

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9.3 Markup with Spoilage

• Markup with spoilage Some items may not be fit
  for sale or will go bad. Sometimes they can be
  sold for a reduced price. Sometimes they are a
  total loss. The selling price has to be higher to
  make up for this loss.

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9.3 Markup with Spoilage

• Example The cost for 36 items is 540. If 6
  items cannot be sold, what is the selling price
  per item for a markup of 25 on selling
  price?

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9.3 Markup with Spoilage

• The cost for 120 items is 360. If 10 are sold
  at a reduced price of 2, what is the selling
  price per item for a markup of 20 on cost?

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10.1 Markdown

• When merchandise does not sell at the original
  price the price must be reduced. The basic
  formula for markdown is
• Example What is the reduced price if the
  original price was 960 and the markdown is
  25?

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10.1 Markdown

• Example Given an original price of 240 and a
  markdown of 96, what is the percent markdown and
  the reduced price?

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10.1 Markdown

• Markdown equationsBreak-even point Cost
  Operating expensesOperating Loss Break-even
  point Reduced selling priceAbsolute loss
  Cost Reduced selling price

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10.1 Markdown

• Given a cost of 25, operating expense of 8, and
  reduced price of 22, what is the break-even
  point, the operating loss, and the absolute
  loss?

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11.1 Basics of Simple Interest

• Simple Interest FormulaI interest, P
  principal, R rate of interest per year, T
  time in years
• Example Given an investment of 9500 invested at
  12 interest for 1½ years, find the simple
  interest.

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11.1 Basics of Simple Interest

• Example If money invested at 10 interest for 7
  months yields 84, find the principal.

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11.1 Basics of Simple Interest

• Example If 2600 is invested for 7 months and
  yields simple interest of 144.08, what is the
  interest rate?

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11.2 Simple Interest for a Given Number of Days

• To find the exact number of days between two
  dates (2 methods)
• Get the number corresponding to each date (Julian
  date) from table 11.1 and subtract
• Add the number of days in between the two dates
  going month by month using the number of days in
  each month

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11.2 Simple Interest for a Given Number of Days

• Find the number of days from April 24 to July
  7(1) Using table 11.1, April 24 day 114July
  7 day 188, days 188 114 74(2) days
  left in April 6 days in May 31 days in
  June 30 days in July 7Total days 6 31
  30 7 74

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11.2 Simple Interest for a Given Number of Days

• Exact interest
• Ordinary or bankers interest
• Example Given an investment of 2600 invested at
  10.5 interest for 180 days, find the ordinary
  interest.

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11.2 Simple Interest for a Given Number of Days

• Example Bella missed an income tax payment. The
  payment was due on June 15 and was paid September
  7. The penalty was 14 simple interest on the
  unpaid tax of 4600. Find the penalty using exact
  interest.days 15 31 31 7 84 days

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11.3 Maturity Value

• Maturity Value amount loaned interest
• Maturity Date date the loan is paid off
• Example A 12,200 loan is borrowed at 9.5 for
  10 months. Find the interest and maturity value.

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11.3 Maturity Value

• Find the Time If a loan of 7400 is borrowed at
  9.5 has interest of 292.92, find the time in
  days and the maturity value

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11.3 Maturity Value

• Find the Principal and Rate If a loan is
  borrowed with interest of 300 for 120 days with
  a maturity value of 7800, find the principal and
  interest rate.

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11.4 Inflation and the Time Value of Money

• Inflation continuing rise in the general price
  level of goods and services
• Consumer Price Index (CPI) one way to measure
  inflation. The CPI reflects the average change in
  prices from one year to the next.
• Time Value of Money the idea that loaning money
  has value and that value is repaid by returning
  interest in addition to principal.

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11.4 Inflation and the Time Value of Money

• Present value principal amount that must be
  invested today to produce a given future value.
• Future value amount that a present value grows
  to also called the maturity amount.

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11.4 Inflation and the Time Value of Money

• Time Value of Money with simple interest of 5
  per year.

2000
2010
2020
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11.4 Inflation and the Time Value of Money

• Example If the present value 8000 at 8.5 for
  140 days, what is the future value?

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11.4 Inflation and the Time Value of Money

• Example If the future value 1985.50 at 9 for
  180 days, what is the present value?

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12.1 Simple Interest Notes

• Promissory note Legal note in which a person
  agrees to pay a certain amount of money at a
  stated time and interest rate to another person
• Face value of note principal (P)
• Maturity value M P I P PRT P(1 RT)
• Term of the note T often given in days
  (convert to years for formulas)

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12.1 Simple Interest Notes

• Example For a promissory note with face value of
  9500, term of 200 days, rate of 10, and date
  made of March 18, find the due date and the
  maturity value.Using table 11.1, March 18 day
  7777 200 day 277 October 4 (due date)

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12.1 Simple Interest Notes

• Example For a simple interest note with maturity
  value of 7632, term of 240 days, and rate of 9,
  find the principal.

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12.2 Simple Discount Notes

• Simple discount note interest is deducted in
  advance from the face value written on the note.
• M face value maturity value (not the
  principal)
• B bank discount (similar to interest)
• D discount rate (similar to rate of interest)
• T time in years

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12.2 Simple Discount Notes

• Maturity for simple interest
• Maturity for discount notes(similar but you
  subtract the discount from the maturity)

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12.2 Simple Discount Notes

• Example For a simple discount note with a
  maturity value of 6800, discount rate of 10,
  and time of 180 days, find the discount and the
  proceeds.

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12.2 Simple Discount Notes

• Example For a simple discount note with a
  maturity value of 8200, discount of 205, and
  date made of 2/9, due date of 5/10, find the
  discount rate, time in days, and the proceeds.

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12.3 Comparing Simple Interest and Simple Discount

• Similarities between simple interest notes and
  simple discount notes
• Borrower receives money at the beginning of each
  note.
• Both notes are repaid with a single payment at
  the end of the period.
• Length of time is generally less than 1 year.

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12.3 Comparing Simple Interest and Simple Discount

• Differences between simple interest notes and
  simple discount notes
• Formulas
• Discount notes
• Interest notes
• A simple interest rate 12 (relative to present
  value) is not the same as a simple discount rate
  of 12 (relative to maturity value.

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12.3 Comparing Simple Interest and Simple Discount

• Converting interest rate to discount rate
• Converting discount rate to interest rate

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12.3 Comparing Simple Interest and Simple Discount

• Example Given an interest rate of 8 and a time
  period of 240 days, find the corresponding simple
  discount rate