Initial price of the goods being reduced a markdown economic phenomena manifests. One may find numerous reasons why businesses markdown their products but mostly to enhance product turnover by means of customer low price appeal. A few examples of how a retailer might be the gainer when markdown a product given.
Should a perishable product come to its expiration date grocery markdown the product so that the retailer is abled to sell it out. Thus, the customers will have been encouraged to have storage bought by the end of the physical year. In fact, this is sales which is the most familiar example of a markdown.
It must be noted, however, that a series of markdowns will not lead to simple subtraction of a certain sum of money from the primary price. The percentage calculation prove that the next markdown will result in a smaller sum taken off then addited per cents applied to a primary cost.
Dell Vostro laptop is $750 to be purchased for patrol cars in a police department.
Total selling price to be 3% off. This is 3%/100% = 0.03 decimal. The saving amount per device is 0.03 * 750 = $22.5. If 70 laptops bought total amount of saving will result in 70 * 22.5 = $1575.
The department saved enough money to buy 1575/750 = 2.1, or two more laptops and 1575 – 2 *750 = $75 saved. The selling company for its part increased product turnover by 2/70 * 100 = 2.8%
Suppose original price of a brand new camera to be $300 and markdown rate 25%. Fist markdown value is evident 300 * 0.25 = $75.
That is how we go from 300 to 300 – 75 = $225. Suppose if two 25% reductions off ( equivalent to $75 each ), cut down 75 * 2 = 150 to receive 300 – 150 = $150 which is 2 * 25% = 50% of the initial value.
The second curtail, in fact, needs to be derived not from 300 but from 225. That’s why the subtrahend will be a bit smaller than 75:
225 * 0.25 = 56.25. And the actual estimate will result in 300 – ( 75 + 56.25 ) = $168.75 which is equivalent to ( 56.25 + 75 ) / 300 * 100% = 43.75%, not 50%.
Markup is the difference between the cost of a good or service and its selling price, in this particular case after the second price cut 168.75 – 150 = $18.75.