Selling Price

In order to make money by selling a product, you need to sell it for more than it costs.

How do you determine how much to charge for a product?

Lesson Objective

Determine the net profit in dollars.

Content Vocabulary

operating expensesoperating expenses

Also known as overhead, the costs of running a business, such as wages and salaries of employees, rent, utility charges, and taxes.

operating expenses

Also known as overhead, the costs of running a business, such as wages and salaries of employees, rent, utility charges, and taxes.

Sport Shop purchases water tubes for $44.98 each.

It sells the tubes for $89.99 each.

The owner estimates the overhead expenses to be 40 percent of the selling price of the merchandise.

What is the net profit on each tube?

Example 1Example 1

Find the markup.

Selling Price – Cost

$89.99 – $44.98 = $45.01

Example 1 Answer: Example 1 Answer: Step 1Step 1

Find the overhead.

Selling Price × Overhead Percent

$89.99 × 40% = $35.996 or $36.00

Example 1 Answer: Example 1 Answer: Step 2Step 2

Find the net profit.

Markup – Overhead

$45.01 – $36.00 = $9.01

Example 1 Answer: Example 1 Answer: Step 3Step 3

Anamarie’s Shoppe buys chemises at a cost of $12.78. Anamarie’s sell the chemises at a selling price of $24.49. Its management estimates the overhead expenses to be 34 percent of the selling price of the merchandise.

What is the net profit on each chemise sold?

Example 2Example 2

Find the markup.

Selling Price – Cost

$24.49 – $12.78 = $11.71

Example 2 Answer: Example 2 Answer: Step 1Step 1

Find the overhead.

Selling Price × Overhead Percent

$24.49 × 34% = $8.3266 or $8.33

Example 2 Answer: Example 2 Answer: Step 2Step 2

Find the net profit.

Markup – Overhead

$11.71 – $8.33 = $3.38

Example 2 Answer: Example 2 Answer: Step 2Step 2

Find the markup, overhead, and net profit.

Selling price: $124.99

Cost: $71.59

Overhead: 40 percent of selling price

Practice 1Practice 1

Markup: $53.40

Overhead: $50.00

Net profit: $3.40

Practice 1 AnswerPractice 1 Answer

Find the markup, overhead, and net profit.

Selling price: $189.50

Cost: $123.56

Overhead: 25 percent of selling price

Practice 2Practice 2

Markup: $65.94

Overhead: $47.38

Net profit: $18.56

Practice 2 AnswerPractice 2 Answer