5.13: Find Retail Prices Given Wholesale, Markups and Sales Tax
Have you ever had to pay sales tax? Take a look at this dilemma.
After the student council meeting, Cameron’s Mom offered to take all of the students out for lunch. They went to their favorite restaurant, “Howie’s Burger Place” for a lunch of burgers and fries. From the restaurant menu, each student ordered the burger special which costs $12.95 each but includes a drink, and a dessert. After eating, Cameron looked at the bill. He saw that 5 students ordered the burger special.
The sales tax is 7%. The food server was particularly attentive so Cameron’s Mom decided to give her an 18% tip. Cameron began to work through the math in his head. How much was the total bill?
That is an excellent question. This Concept is all about different consumer percents. Pay close attention and you will be able to solve this problem at the end of the Concept.
Guidance
We’ve now seen on many occasions how practical percent is in everyday life. In most things you purchase, percent is used in one way or another to calculate a final price, a discount, tax or a tip. Your understanding of this is important in making sure that you get charged the right price and that you tip appropriate amounts as well.
Let’s start by looking at wholesale prices and markups.
Most companies are in business to make a profit. Companies generally offer goods or services or both. Stores that sell you products like hairspray, potato chips, and video games, buy those products from the companies that make them. Because they buy so many of the same products, they get special prices called wholesale prices . They figure out how much each piece or unit costs them and then they charge you a certain amount more for each product. The difference is called the gross profit. After they pay all of their other expenses like wages, utility bills, insurance, etc., they hope to have some money left over. This is their profit.
Knowing just how much to charge for each product is sometimes tricky. If a company charges you too much, you may not purchase products from them. Companies have to study the market and their true costs in order to calculate the best price to charge to remain competitive but still make a profit. After studying the market, they decide on a markup—a percent by which they will increase the wholesale price to get the retail price. So the wholesale price is what the companies pay for the product and the retail price is what the company charges for the same product.
The percent increase from the wholesale price to the retail price is the markup.
Take a look at this situation.
Let’s suppose a company sells toothpaste. They buy the toothpaste for $1.10 per tube; this is the wholesale price. Remember, they may buy a case of 200 tubes all at once. In order to make a profit, they mark the price up by 65%; this is their markup. So in order to calculate the retail price, they increase the wholesale price by 65%.
Let’s figure out the retail price given the wholesale cost and the percent of the increase.
Amount of change:
Add increase to the wholesale price:
Round off the price to the nearest whole cent: retail price is $1.82.
The retail price of the toothpaste is $1.82.
To calculate the retail price:
- Find the amount of change by multiplying the wholesale cost with the % of increase. Remember to convert the percent to a decimal to multiply.
- Then add the increase to the wholesale price.
- This is the new retail price.
Take a few minutes to write these steps in your notebook. Sometimes, you will also have to deal with sales tax.
On most products that you purchase, stores also charge you a sales tax which is determined by the government. This money is paid to the government so that they can provide services to the people. Tax is usually a percent increase that is added to the retail price.
If you were to buy a dozen roses from the company in the previous example, you would pay $33. Let’s suppose there is a tax of 6%. This would be an increase of 6% so we would use a similar process to find the final price. Because this deals with money, we round the calculations to the nearest cent (or hundredths place).
Amount of tax:
Add tax to the retail price:
The total price with tax is $34.98.
To calculate sales tax:
- Multiply the retail by the percent of the sales tax. You will need to convert this percent to a decimal first.
- Then add that amount to the retail price.
- This is the final cost to the customer.
Write these steps down in your notebook.
Use what you have learned to solve each problem.
Example A
Find the total price for $4.99 with a 5% sales tax.
Solution:
Example B
Find the total price for $25.65 with a 15% gratuity or tip.
Solution:
Example C
Find the total price for $345.50 with a 10% markup.
Solution:
Now let's go back to the dilemma from the beginning of the Concept.
Here is the solution to the problem. Notice each part of the bill and how it is calculated.
First, add up all of the meals.
Calculate the tax of 7%:
Add the tax to the price:
Calculate the 18% tip:
Add the tip to the price:
The total bill is $114.46. You could round up to $114.50 to make the numbers even too.
Vocabulary
- Wholesale price
- the price that a merchant pays when they purchase a product from a manufacturer.
- Markup
- the amount that the merchant charges retail to the customer. The difference between wholesale and retail is the markup and also the profit.
- Sales Tax
- a percentage charged on purchases, and that goes to the government.
Guided Practice
Here is one for you to try on your own.
A florist gets a dozen roses for $15. They charge a markup of 120%. What is the retail price of a dozen roses?
Amount of change:
Add increase to the wholesale price:
The florist charges $33 for a dozen roses.
Video Review
Explore More
Directions: Calculate the retail price given the wholesale price and percent markup.
- Wholesale price: $6.43 markup: 38%
- Wholesale price: $612.00 markup: 70%
- Wholesale price: $.22 markup: 55%
Directions: Find the total cost after adding the tax.
- Retail price: $76.50 tax: 8%
- Retail price: $399 tax: 4.75%
- Retail price: $8.79 tax: 7.25%
- Retail price $44.56 tax: 5%
- Retail price $345.00 tax 11%
Directions: Find the total cost after computing the wholesale price and the tax.
- wholesale price: $4.15 markup: 10% tax: 6%
- wholesale price: $116.21 markup: 33% tax: 5.5%
- wholesale price: $51.55 markup: 61.3% tax: 3.75%
- wholesale price: $24.25 markup: 40% tax: 6%
- wholesale price: $44.15 markup: 30% tax: 6%
- wholesale price: $125.75 markup: 50% tax: 6%
- wholesale price: $150.00 markup: 80% tax: 6%
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Description
Learning Objectives
Here you'll find retail prices given wholesale, markups and sales tax.
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Date Created:
Jan 23, 2013Last Modified:
Aug 21, 2014Vocabulary
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