Calculation of gross margin should consist of determining the amount of profit before operating costs are deducted. Calculating markup should consist of adding amount to cost to determine selling price. Calculating markdown should be the amount of reduction subtracted from selling price.
Process/Skill Questions:
- Why might a retail fashion business use markdowns?
- When is a markup on an item too high? How much markup is enough?
- What mathematical skills are required in calculating gross margin? Markup? Markdown?
- Why is it important for a sales representative to be able to mentally calculate markdown and markup?
- How do profit and loss relate to markup?
- What is the relationship among price, demand, and profit?